Fears over spiralling debt crisis in Scotland

11th December 2010

The Scotsman newspaper has this week warned of the risk of spiralling debt problems in Scotland. A number of warning signs have been detected, raising fears about personal finances in Scotland in 2011. In particular there is concern about a rise in the amount of home repossessions and personal insolvency measures such as a Scottish trust deed.

The think tank, The Fraser of Allander Institute, have estimated that up to 113,000 jobs are currently at risk in Scotland. R3, an insolvency trade body, has released research indicating that a quarter of Scots would not manage financially for more than a month if they were to lose their job, with a further 57% admitting that they would not manage to keep up with their bill payments if the duration of unemployment were to last six months.

Shelter Scotland is warning that the scaling back of the welfare safety net poses a further risk. Government mortgage interest payments to struggling homeowners are being cut leading to a risk of increased repossessions. Repossession numbers have fallen recently, however a significant risk of increases appears to exist, especially if mortgage interest rates begin to climb. Shelter Scotland claims that one in six UK homeowners is constantly struggling to pay their mortgage, and that one in three Scottish homeowners is worried or very worried about continuing to meet their mortgage payments.

Many Scots are already carrying significant levels of personal debt which would create further difficulties if they were to be made unemployed. R3 state that 16% of working Scots have debts of £5000 to £10000, with a further 5% having unsecured debts of £25000 to £50000. These high levels of debt raise the spectre of an increase in bankruptcies and trust deeds next year after a recent improvement in the insolvency figures.

The advice to Scots who are worried about their jobs is to cut back on their expenditure, using their savings to clear their debts as quickly as possible. Once these debts have been cleared they should try to create a savings safety-net which would help them buy some time should their redundancy fears become reality.

If debt has already become a problem then you should waste no time in seeking advice. There is a tendency to avoid dealing with financial matters in the run-up to Christmas, but delay tends to result in a decreasing (and often less attractive) number of debt solutions remaining available when the advice is finally taken. The options to deal with unmanageable debt include a trust deed, the Debt Arrangement Scheme, debt management plans or even bankruptcy.

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