Scots personal bankruptcy numbers soar 29.2 per cent year-on-year

Eileen Blackburn

The AiB figures reveal that personal insolvencies rose from the 2,533 recorded in the first three months of last year to 3,272 in Q1 of this year. The quarterly numbers for personal insolvencies in Scotland haven’t been this high since Q4 2013.

The increase was highest among those taking out a Protected Trust Deed (PTD) which has risen by 39.9 per cent year on year from 1,464 to 2,049. This is the highest quarterly figure for PTD’s since Q3 2012.

For another type of statutory debt solution, the Debt Arrangement Scheme (DAS), there were 2,544 Debt Payment Programmes (DPPs) approved in 2018-19, 226 more than a year earlier.

The figures mean personal insolvencies (bankruptcies and protected trust deeds (PTDs) have now risen for the third consecutive year but remain below levels seen between 2006-07 and 2013-14.

The picture was not much better for corporate insolvencies in Scotland which rose by 34 per cent in the first three months of this year compared with the previous quarter, and rose by 8 per cent compared with the same quarter in 2018.

The number of corporate insolvencies increased from 884 in 2017-18 to 966 in 2018-19. Last year also saw them increase from 259 in 2017-18 Q1 to 280 in 2018-19 Q1, the AiB said.

Eileen Blackburn, head of restructuring and debt advisory at accountants French Duncan LLP, said: “The increase in the number of personal insolvencies in the first quarter of 2019 is expected given the upward trend over the last few years and the substantial increase which occurred last year. We have now experienced four years in a row of rising personal insolvencies which is a clear sign that large numbers of the Scottish population continue to experience serious financial problems with insurmountable debts.”

“With almost 33 Scots a day facing insolvency throughout 2018 it is depressing that this trend is continuing. The issue of long-term debt continues in Scotland with many people, despite low interest rates and high levels of employment, stuck in a spiral of indebtedness which they are unable to escape. The annual number of Scots being bankrupted has increased by 37.4 per cent since 2015.”

Eileen continued: “Of considerable concern is the number of Scots taking out a Protected Trust Deed (PTD) which has risen by over 70 per cent since 2015. This is usually a route out of debt used by the more affluent who have property and assets this is a great worry. We may be about to see an explosion in the number of middle-class debtors.”

“What these first quarter figures reveal is that substantial numbers of Scots are simply existing with their debts. They are paying interest each month, but the underlying debt remains the same. These people are vulnerable to any slight change in their circumstances such as reduced hours, less overtime, job loss, an increase in their family or an end to a mortgage deal. All of these small, but significant, changes can have a serious impact upon the long-term indebted tipping them over into insolvency.”

Eileen addded: “Some of this debt could even remain from the financial crash of 2008 or have simply built up over a number of years and become insurmountable. It is an indication of just how deep-rooted serious debt now is within Scottish society as the current levels of personal insolvency were, until comparatively recently, unheard of. Up to 2004 over 11,000 Scots facing insolvency each year would have been unheard of. But personal insolvency has become normalised and more commonplace. Individuals who find themselves with long term debt which never reduces, which is a monthly struggle to meet the interest payments are in serious financial trouble and should seek advice. Nobody needs to live with this level of indebtedness and there are ways of getting out of this debt. Those who feel that their financial position is out of control should immediately seek help before they become an unfortunate future insolvency statistic.”

The AiB Annual Report and Accounts for 2017-18, which includes a summary of insolvency statistics in 2017-18 and additional information on division of funds by bankruptcy type as well as local authority analysis, is available here.