Personal insolvencies in Scotland stabilise

26th October 2016

Personal insolvencies in Scotland have remained largely stable for the second quarter of the year, according to the latest figures from Accountant in Bankruptcy (AiB). Total personal insolvencies, which include both bankruptcies and protected trust deeds, totalled 2,424 for the second quarter of 2016-17 up to 30 September 2016, a small 0.8% increase on the previous quarter.

While the total is up on the same quarter a year ago, 2015-16 as a whole delivered record – and anomalous – low numbers after the introduction of the Bankruptcy and Debt Advice (Scotland) Act, which amended the laws governing bankruptcy on 1 April 2015. Personal insolvencies in Scotland have been dropping consistently since 2008-09, and the numbers fell significantly in early 2015-16, the first months after the new legislation came into force.

With the second quarter of 2015-16 out of the equation, the 1,113 bankruptcies awarded are 35.3% lower than the same period in 2013-14 and 32.7% lower than the second quarter of 2014-15. This is also a minor 2.7% drop on the number of bankruptcies awarded in the first quarter of 2016-17. The number of protected trust deeds recorded increased to 1,311 from 1,261, a 4.% rise from the previous quarter.

In a sign more people are seeking to take control of their finances, new debt payment programmes approved under the Scottish Government-backed Debt Arrangement Scheme (DAS) increased by 29.8 % on the previous quarter to 662. A total of £9.2 million was repaid through DAS to creditors this quarter which is a slight 0.6% decrease on the amount repaid during the previous quarter. Over 400 people paid off their debts in full this quarter through DAS with 408 DAS debt payment programmes completed, which is 12.1% up than the previous quarter, and a significant 14.3%  rise compared to the same quarter of 2015-16.

Commenting on the latest figures, Business, Innovation and Energy Minister, Paul Wheelhouse, said: “While it is never acceptable to have people struggling to make ends meet, it does appear we are seeing a more regular pattern emerge in personal insolvencies. Numbers were at historic lows during 2015-16 as the industry readjusted to the new legislation. A more accurate comparison is with the same period in 2013-14 and 2014-15, where we are 35.3% and 32.7% lower today respectively. It is also reassuring to see more people in need access the Debt Arrangement Scheme to help them make a fresh financial start without facing the distress of insolvency.”

The number of Scottish businesses becoming insolvent or entering receivership fell from 258 in the first quarter of 2016-17 to 218 in the current quarter. AiB reports on the number of corporate insolvencies and member voluntary liquidations logged. As a consequence of the time taken between the date a corporate insolvency is awarded or a member voluntary liquidation is registered and when AiB receives notice, the figures may not exactly reflect the number of corporate insolvencies awarded or member voluntary liquidations registered during a quarter.

The figure for the quarter is made up of 154 compulsory liquidations and 61 creditor voluntary liquidations. There were only three receiverships recorded for the quarter. There were also 106 members’ voluntary liquidations, which is down by half from the 215 recorded in the previous quarter.

The Minister continued: “The number of businesses going to the wall has fallen by 16% on the last quarter and is now at the lowest level we have seen in the last 12 months. Fewer businesses being forced to close means more people can keep their jobs and contribute to build a robust and growing economy. However, given the context of the impact of investor and business uncertainty created by the EU referendum result, we need to remain vigilant and will continue to monitor trends carefully.”