Scottish insolvencies on the decrease

22nd January 2014

Demand for statutory debt solutions continues to decline.

Official statistics released this morning by The Accountant in Bankruptcy (AiB), Scotland’s insolvency service show that personal insolvencies have decreased by 2.2 per cent on the previous quarter and by 13.7 per cent on the same quarter of the previous year.

There was a total of 3,335 personal insolvencies in Scotland this quarter, with the level of reduction being low compared to other quarters this year, but still in line with the longer term trend which shows a general decline since 2008-09.

The use of the Debt Arrangement Scheme (DAS), a Scottish Government debt management tool, continues to increase with 1,181 applications having been approved and a total of £7.7 million being repaid in this quarter.

Minister for Energy, Enterprise and Tourism, Fergus Ewing, said :

“The overall demand for statutory debt solutions in Scotland continues to decline. The number of bankruptcies awarded in Scotland has been decreasing since 2008-09 and we expect this to continue.

“However, we must also recognise that - within this overall, decreasing trend – the proportion of people entering bankruptcy with little income and few assets is rising. This quarter, 49.4 per cent of all applications were made via the ‘Low Income, Low Asset’ route. This is a 7.9 percentage point increase, compared to the equivalent figure from last year.

“Scotland’s bankruptcy legislation has to do more to provide a safety net for vulnerable, low-income debtors and their families. That is why we are introducing a new ‘Minimal Asset Process’ (MAP), which will provide quicker, cheaper and more effective debt relief to those who need it most; and that is why the Scottish Government will slash the application fee for entry to the MAP by at least 50 per cent. These measures will be part of the Bankruptcy and Debt Advice (Scotland) Bill, which has its stage 2 consideration today.

“While it is encouraging to see that personal insolvencies have gone down, it is important that we continue to work towards helping people stay out of debt and we will invest in supporting an educational programme to provide financial education to those most at risk.

“We are working towards a ‘Financial Health Service’ for Scotland, by introducing new legislation to provide a modern system of debt advice, debt relief and debt management. We will also continue to raise awareness across Scotland of the negative impact of high interest borrowing and promote Credit Unions as an ethical, sensible alternative.

“It is good to see that the use of the Debt Arrangement Scheme remains high, with more people using the scheme to take control of their finances and pay back their debts in a dignified way”.