Credit, Collections & Insolvency News
Annual figures from Accountant in Bankruptcy (AiB) have indicated that personal insolvency numbers in Scotland rose by nearly 3% in the year 2022-2023.
The figures showed taht there were 8,004 personal insolvencies, this was an increase of 3% on 2021-2022’s figure of 7,769, a rise of 5.3% on 2020-2021’s figure of 7,600 and a fall of 40.7% compared to pre-pandemic levels in 2019-2020 (13,491).
Commenting on the figures, Richard Bathgate, Chair of insolvency and restructuring trade body R3 in Scotland and Restructuring Partner at Johnston Carmichael, said “For Scottish consumers, uncertainty is high, and in turn, spending is low. Most are prioritising everyday essentials over more discretionary categories like beauty, home improvements, and nights out, leaving these types of businesses particularly vulnerable if this continues.”
“Though the economy has shown some unexpected resilience so far this year, with a record low of unemployment levels and rising business confidence, I think a further wave of insolvencies is inevitable in 2023 unless the picture drastically improves.”
“It has also been a tough year for individuals in Scotland. There have been more than 1,130 personal insolvencies over the last financial year, driven by a rise in bankruptcies and protected trust deeds.”
“The transition from the pandemic to the current cost-of-living crisis has been abrupt, leaving many people financially fragile and struggling to make ends meet.”
“For some, a build-up of savings has kept them afloat, while others have resorted to borrowing and credit options, even to cover the essentials which is a huge cause for concern. Excessive borrowing can put peopl”e in danger of falling into a long-term debt trap that may be difficult to escape, particularly given that the cost of debt is rising in line with higher interest rates.
“The rent freeze introduced last year gave tenants in Scotland some stability, particularly for those on low-incomes and most vulnerable to insolvency. But eyewatering energy bills and food inflation at a 40-year high have limited the impact of these measures.”
“Our message is simple: don’t struggle with financial worries on your own, whether you’re a business owner or an individual. We know how hard it is to take the first step, but discussing your concerns with a qualified professional at an early stage can provide you with the time you need to make an informed decision about how you resolve your situation.The sooner you seek help, the greater the range of options available to you – and most R3 members offer a free initial consultation to help you gain a better understanding of your financial situation and the potential solutions to improve it.”
The Accountant in Bankruptcy data also indicated that the number of Scots entering Debt Payment Programmes (DPP) under the Debt Arrangement Scheme (DAS) increased by 15.9% over the past 12 months, and applications for statutory moratoriums increased by 21.5%,
Chris Malloch, Director at Cleanslate.co.uk, the scottish personal debt solution arm of Interpath Advisory, said “The increasing number of Scots on debt payment programmes is a stark indicator of the extent to which the current cost of living crisis is impacting people across Scotland. It’s reassuring that insolvencies have not risen recently. However, with the increase in applications for moratoriums, and rising interest rates, the reality is that more and more people are simply unable to keep up with rising costs.”
“We’re also now starting to see an increase in the number of applications by creditors to make people bankrupt, indicating post-Covid forbearance is starting to reduce.”
The growth in people accessing DAS or requiring statutory moratoriums, combined with increasing creditor petitions, could indicate a flood of insolvencies and debt payment programmes to come.”
“A fresh round of cost-of-living payments are now underway; however, these are targeted at those on universal credit or other qualifying benefits. We are being approached by an increasing number of people who will not qualify for those payments and are struggling with their debts. Since 2021, we’ve seen the income of clients entering DAS increase by 11%, indicating middle incomes are starting to feel the squeeze too.”
“In our experience over the last couple of years, people accessing DAS needed to cut their debt repayments by £350 per month to bring them out of the red. This month alone, the average reduction needed is currently £795 per month. The cost-of-living quarterly payments of £300 will undoubtedly be helpful to those who receive them, but there is clearly also a rising demand for help for those on middle incomes who are struggling to keep up with their commitments.”