WIREDGOV

Fewest Scots enter formal debt solutions since 2000

New quarterly figures from Accountant in Bankruptcy show the lowest level of total personal insolvencies, which include both bankruptcies and Protected Trust Deeds, in over 14 years.

In the first quarter of 2015-16 up until June 30, a total of 1,606 personal insolvencies were recorded, which is the lowest combined total since the fourth quarter of 2000-01. This represents a 38.5 per cent decrease on the previous quarter and a 45.8 per cent decrease from the total recorded in the same quarter a year ago.

While the long term trend shows insolvencies in Scotland dropping consistently since 2008-09, the current figures also cover the first months since the legislation governing bankruptcy was amended on April 1, 2015 by the Bankruptcy and Debt Advice (Scotland) Act.

This legislation introduced a suite of measures such as mandatory money advice for people seeking access to statutory debt relief solutions such as sequestration and a Common Financial Tool for money advisers allowing them to quickly assess whether individuals can contribute towards repayment of their debts.

As well as a new web-based bankruptcy application system, the changes introduced a lower cost access route to bankruptcy for those with few assets and who would be unable to make contributions and a requirement for those who can pay to make payments for an additional year.

The new figures highlight that money advisers and debtors may need a period of time to become familiar with the new requirements and processes. AiB is therefore taking action to assist the bedding-in period by holding a series of training events for advisers, among other measures.

757 bankruptcies were awarded for the quarter, a 56.5 per cent reduction on the previous quarter and 56.9 per cent fewer compared to the equivalent quarter 12 months ago.

There were also 530 debt payment programmes approved under Debt Arrangement Scheme, which is a 16.3 per cent decrease on the previous quarter and 58 per cent lower than the same quarter the previous year. This is the lowest quarterly total in over four years.

However, the amount repaid to creditors through DAS continues to rise. £9.5 million was repaid through DAS in the first quarter of 2015-16, which is 0.8 per cent more than the previous quarter and 11 per cent higher than a year ago.

The number of businesses going to the wall remained static with AiB receiving 197 notices of Scottish registered companies becoming insolvent or entering receivership in the first quarter of 2015-16. This is the same number as the last quarter although the total is 21.2 per cent lower than the same quarter in 2014-15.

Business Minister Fergus Ewing welcomed the latest figures.

He said:

“The numbers of people falling into financial difficulty and having to seek debt relief has been falling steadily for some time – and this is a welcome sign the Scottish economy is on the road to recovery.

“The Bankruptcy and Debt Advice (Scotland) Act was developed following years of consultation with experts across the financial advice community and from studying how other nations deal with issues of personal debt.

“It is likely these changes have had a bearing on the statistics for the current quarter while the money advice and insolvency sectors familiarise themselves with the new regulations and processes.

“We have been working with our stakeholders to streamline these new processes. For example, we have amended the guidance for applicants whose sole income is derived from benefits to make it easier for these individuals to apply.

“We will continue to respond to feedback from our stakeholders to deliver further improvements and ensure debt relief is accessible to everyone who needs it.”

Notes To Editors

A full statement of Scotland’s insolvency statistics for the first quarter of 2015-16 is available here – http://www.aib.gov.uk/scottish-insolvency-statistics-2015-16-quarter-1-release

Scotland’s Financial Health Service www.scotlandsfinancialhealthservice.gov.uk is a one-stop shop for advice a range of money issues and signposts to organisations offering information and advice on debt, managing money, housing, homelessness and ethical lending. The Scotland’s Financial Health Service helpline is available by calling 0800 707 6696.

Further information regarding insolvency in Scotland, including legislation, can be found on the Accountant in Bankruptcy’s website www.aib.gov.uk