Some trust deed advisers predict a second debt disaster

4th July 2011

Markit’s most recent household confidence report has re-emphasised the growing pressure on the finances of many Scottish households. June’s survey reports that for every six people who believe their finances to be in a worse state than they were last month, only one says they are improving. These results help to identify the lack of consumers’ confidence that we are any nearer to a full recovery from the recession.

2009 and 2010 saw a huge growth in the number of individuals in Scotland seeking relief from debt by way of sequestration (bankruptcy) or a protected trust deed . Many experts suggested this trend would continue into 2011; however, protected trust deed numbers, for example, have fallen considerably.

So to what do we attribute the reduction in the number of trust deeds? Many people have been dipping into their savings safety net to plug the gap in their finances between their income and expenditure. Many people have also been adding to their debt level to plug the same gap where no savings safety net exists. The Office for Budget Responsibility (OBR) has predicted these will be continuing themes over the coming years. They estimate that over the coming years a high number of households will borrow more, with average household adding £20,000 to their total level of debt.

If this prediction is true, it would appear Scotland is heading rapidly towards a second surge in debt distress which can only result in an increase in bankruptcies and protected trust deeds further down the line.

An average UK adult carries something like £8,000 of unsecured debt. If every household were to add a further £20,000 of debt it becomes clear that a greater number of people would find themselves defaulting on repayments.

There are a number of ‘red flags’ which indicate that personal debt has become problem-debt. If any of the following apply to you it will be wise to seek advice on which debt solutions, including a protected trust deed, will be most applicable to your circumstances:

• Once debts are paid there is little money to live on
• The level of debts increases from month to month
• You’re using credit to pay for debts
• Finding sources of credit is becoming increasingly difficult
• Low-interest deals are no longer available
• Debt is making you stressed and unwell
• Worrying about debt has affected sleep
• Debt is affecting relationships with family and friends

If you are concerned about your level of debt then you should act quickly before the situation becomes worse. You can talk to our trust deed experts on our advice line or contribute to our trust deed forum to get answers to your trust deed questions.

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