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Financial threat to families in Scotland
The Accountant in Bankruptcy has this morning released the quarterly insolvency statistics for Scotland.
In the most recent quarterly period:
- Overall personal insolvency levels totalled 4664. This figure includes sequestrations and protected trust deeds. This figure is 13% less than for the previous quarter, but in comparison to the same period last year there has been a modest 2% increase in this total.
- Of these 4664 personal insolvenices, 2615 were bankruptcies. While the figure is down 8% compared to the prior quarter, the total has increased by 8% compared to the same period last year. If you only include debtor-petitioned bankruptcies (by removing the number of persons made bankrupt by other parties) the figure has increased by a more significant 15% compared to the same period last year.
- The number of people signing a trust deed has been in decline. 2049 trust deeds went ahead during this quarterly period. This represents a 19% decline compared to the last quarter, and a 2% decline versus the equivalent period last year.
- The Debt Arrangement Scheme continues to expand. 878 Debt Arrangement Schemes were approved during the last quarter, a 100% increase compared to the same period last year.
What can we conclude from these statistics?
The number of people entering into formal debt solutions is thought to be somewhat seasonal. Therefore a comparison with the results for the same period last year seem to provide the best basis for analysis.
Insolvency in general has increased, though the modest increase of 2% compared to last year may surprise some people given the current economic climate. This may call into question some recent predictions of an exploding debt timebomb this year.
Bankruptcies figures have increased while trust deeds have reduced in number. This may well be a reflection of the fact that the average family has experienced pressure on their disposable income over the past twelve months due to limited wage growth at a time of significant price inflation.
A trust deed requires that an acceptable level of disposable income can be pledged to the arrangement. Bankruptcy carries no such requirement. When disposable income is in decline it is therefore no surprise that bankruptcy would become the appropriate option for a greater percentage of those voluntarily entering personal insolvency.
The Debt Arrangement Scheme seems to be reaching a much wider audience. There appears to be a greater appreciation amongst advisers, commercial and free-to-client, of the benefits that DAS can offer. This seems to be encouraging more advisers to suggest DAS to clients as an alternative to either an informal debt management plan, or a less severe option than a personal insolvency.Tags: debt arrangement scheme, trust deed