Number of personal insolvencies in Scotland soars

The numbers of personal insolvencies in Scotland rose by almost a fifth in 2016-17 compared with 2015-16, to hit 9,958.

Provisional data shows the number of personal insolvencies in Scotland increased by 1,484 or 18 per cent, with final figures for the period to be published in July.

While the number of personal insolvencies (bankruptcies and protected trust deeds (PTDs)) increased last year, they remained at the second lowest level since 2005-06.

There were also 5,473 PTDs registered in 2016-17, a 16 per cent increase on the previous year.

In 2016-17, there were 2,232 debt payment programmes (DPPs) approved under the Debt Arrangement Scheme (DAS), a similar level to the 2,041 approved in 2015-16. In 2016-17, £37.3 million was repaid from debtors to creditors (minus fees) under DAS, similar to the £38.0 million repaid in 2015-16.

Figures covering the first three months of this year showed were 2,513 personal insolvencies between January and March, up from 2,263 personal insolvencies in the same of quarter of 2015-16.

There were 1,112 bankruptcies awarded during the quarter, a 8.2 per cent increase on the same quarter in 2015-16.

The number of PTDs increased by 13 per cent to 1,401 over the same period.

There were 531 DPPs approved under DAS. A total of £9.2 million was repaid through DAS during this quarter, a 2.7 per cent decrease on the quarter in the previous year.

The number of Scottish registered companies becoming insolvent or entering receivership decreased in the fourth quarter of 2016-17, with 155 companies becoming insolvent compared with 230 in 2015-16 Q4.

The number of members’ voluntary liquidations (solvent liquidations) decreased from 358 to 119 over the same period.

Meanwhile, there were 840 corporate insolvencies in Scotland in 2016-17, 63 fewer than a year earlier.

Responding to the rising figures, Tim Cooper, Chair of the insolvency and restructuring trade body R3 in Scotland, said: “A direct comparison with 2015-16 is tricky given the impact of the introduction of the Bankruptcy and Debt Advice (Scotland) (BADAS) Act 2014, which kept numbers low last year as the market adapted. But it’s worth noting that insolvencies are higher now than they were in the final quarter before BADAS was introduced.

“There are certainly some new factors putting upward pressure on insolvency numbers.

“Inflation is rising, while real pay has not kept pace with increases in the price of essentials like food and fuel. For many people whose finances were already precarious, this may have been enough to put them in a position where they have to consider entering a formal insolvency procedure. Many more people who depend on current low interest rates to make borrowing affordable may find their finances squeezed when rates rise.

“Scotland is particularly sensitive to inflation as a relatively high proportion of Scots have fixed incomes, which makes coping with price rises difficult.

“According to R3’s latest research with ComRes, more than a third (36%) of Scottish adults say they are worried about their current level of debt, and more than two in five (43%) say they often or sometimes struggle to make it to payday.

“That said, it should be remembered that insolvency numbers are far lower now than they were in the aftermath of the recession. Numbers may be rising, but this is a very small rise compared to the decrease in numbers we’ve seen since 2008-9.

“The new figures should be a reminder to everyone that taking charge of your finances is vital, as the earlier you address problems, the more options you have open to you. I would strongly advise anyone worried about their finances to seek impartial advice from a properly qualified professional.”