Scottish personal insolvencies increases by 10%

24th January 2019
Consumer Collections

The latest statistics from Accountant in Bankruptcy (AiB) have highlighted a 10% rise in bankruptcies with an overall increase in Scottish personal insolvencies continuing to be driven by growth in the protected trust deed (PTD) market.

In the third quarter of 2018-19 covering the period 1st October to 31st December, there were 1,981 PTDs in the third quarter of 2018-19, an increase of 23.8% on the same quarter last year.

Awards of bankruptcy totalled 1,217 and a 9.9% increase on the same quarter in 2017-18 when 1,107 were awarded. Total personal insolvencies which include bankruptcies and PTDs increased by 18.1% up from 2,707 in 2017-18 to 3,198 in 2018-19.

The Scotland-only Debt Arrangement Scheme (DAS) saw an increase in approved debt payment programmes with 668 awarded in the third quarter compared to 570 awarded in the same quarter last year, showing more Scots are successfully regaining control of their debt.

DAS allows individuals the ability to get back on track without entering insolvency, to re-pay their debts without fear of further action and obtain relief from additional interest and charges. Within the quarter £9.1 million was repaid through the scheme, slightly down on the £9.5 million in the same quarter last year.

Commenting on the latest figures, Minister for Business, Fair Work and Skills Jamie Hepburn said: “These figures highlight the uncertain economic times we are facing and the fact that more Scots are finding themselves without enough to live on.”

“The economic damage caused by Brexit and the challenges of the roll out of Universal Credit bear much of the blame.”

“At this time during the post-Christmas period when finances may have been stretched I would encourage those who are struggling to seek free and impartial advice at the earliest opportunity to address the problem before it gets out of hand.”

The Scottish Government has recently published a consultation on PTDs focusing on concerns they may not always present the appropriate solution for all individuals signing up to them or whether they consistently strike the right balance between the interests of creditors and those dealing with debt.

Overall, personal insolvency numbers in Scotland for the whole of 2018 were 14% higher than in 2017, and were at their highest level since 2013. The number of personal insolvencies (bankruptcies and protected trust deeds) in Scotland rose by 4% in October-December 2018 compared with July-September 2018, and rose by 18% compared with October-December 2017.

Commenting on the Scottish Insolvency Statistics, Tim Cooper, Chair of R3 in Scotland, the insolvency and restructuring trade body said “Annual numbers of personal insolvencies in Scotland have been rising every year since 2015, and 2018 continues this trend. In line with this, R3’s members in Scotland reported increased activity levels in dealing with financial distress across 2018.”

“Ten years on from the start of the global financial crisis, many people have reached the limits of their borrowing capacity, and are – put simply – tired of being in debt. Debt consolidation and zero-percent interest rate credit cards will only go so far, and larger numbers of people are seeking a fresh start through a form of personal insolvency, rather than continuing in a holding pattern with interest and charges building little by little.

“Although the Scottish unemployment rate recently hit a record low, this does not tell the whole story; 22% of Scots aged 16-64 are counted as economically inactive, and not included in the jobless rate, for example. Recent years have also seen rising numbers of people in work but below the poverty line.”

“The UK inflation rate generally decreased over the course of 2018, giving a small measure of relief to squeezed budgets, and the fall in fuel costs towards the end of the year will also have helped. However, this easing of fuel prices and the overall inflation rate comes off the back of a long period of rises, which will have put pressure on budgets.”

“While this rise in personal insolvency is troubling, there is a silver lining in that there has been, to an extent, a shift in the culture around debt. People now are more willing to talk about their personal finance problems, and to seek help and advice, rather than bottling everything up until it escalates to a degree that can no longer be ignored. There is more progress to be made on this, but anything which makes it easier for people to address financial problems is to be welcomed. The sooner that someone in financial distress reaches out for help, the more can be done to resolve their situation.”

 

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