Expert predictions of higher protected trust deed numbers in 2012

A recent report from PKF has predicted that the number of people in Scotland becoming insolvent either via bankruptcy or a protected trust deed will rise to 20,000 in 2012. Many Scots have found themselves struggling to make ends meet due to the rising cost of living at a time pay raises aren’t keeping pace. This resulted in the first quarter of 2011/2012 witnessing the number of protected trust deed cases reaching their second highest recorded figure.

The accountancy firm PKF partly based their predictions on the increase in sequestrations and protected trust deed cases during 2011. There were 2372 protected trust deed cases recorded during the first quarter of the 2011/2012 year. As previously reported in our protected trust deed blog, this number represented a 51% increase versus the previous quarter and a 6% increase compared to equivalent period in the previous year. Bankruptcies (sequestrations) also increased 10% versus the previous quarter.

Fears over public sector redundancies and wage freezes contribute to the current concerns. In addition, the private sector is expected to lose 25 Scottish businesses a week due to insolvency. This is leading to further uncertainty regarding job security. A period of unemployment is often a precursor to the type of serious personal debt that often results in bankruptcy or a protected trust deed.

It is expected that 2012 will be the year that the cuts really begin to take effect. Child benefit is being lost to better-off families, families will have to work 24 hours per week to qualify for working tax credits compared with the current 16 hours, and fewer families will qualify for child tax credit due to the income threshold being lowered.

The combination of these factors is likely to leave many people (that are already struggling financially) having their income cut further while having to find more money to pay for essential items. This has a downward effect on the capacity to repay debt, which will be sufficient to push some people towards insolvency via sequestration or a protected trust deed. The insolvency trade body R3 has noted that many people are reaching the stage where they cannot meet all of their repayments.

Entering a protected trust deed will depend upon an individual having enough disposable income from which they can make an offer to (partially) repay their creditors (usually over 36 months). By contrast, there is no requirement for having any disposable income to proceed with sequestration. Therefore persons that have some money to pay towards creditors may consider a protected trust deed rather than sequestration, while those whose incomes are greatly reduced and have no money available after paying essential living expenditure are more likely to consider sequestration as a route out of debt.

John Hall, from R3, has explained that he believes that the dramatic rise in the number of more affluent Scots being made bankrupt or entering a protected trust deed is a further sign that the after effects of the recession are spreading among all sectors of society, with the result that personal insolvencies will continue to rise and remain at high levels for several years to come.

If you are concerned about your debts you may wish to visit our protected trust deed forum. You will be able to ask debt questions and receive advice on the full range of debt resolution options that are available to you. Representatives of three protected trust deed firms are available in the forum to answer any detailed or technical questions that you might have.

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