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Warning as insolvencies soar by 25%
|The following appeared in the Herald on 21st July 2011.|
Data indicates the better off now being hardest hit
The worst is yet to come for Scotland´s debt crisis after the biggest quarterly rise in the number of people going bust since the recession began in 2008, experts have warned.
More than 5000 people, a rise of 25% on the previous four months, were declared insolvent between April and June, according to Accountant in Bankruptcy (AiB), which deals with cases north of the Border.
The statistics show that although the figure was down 1% on the same period last year, most affluent debtors are increasingly being hit hardest.
One charity dealing with the problem said the recent rises in energy bills and food, in particular, will hit the poorest harder and push more over the edge in the months to come.
It came after The Herald revealed yesterday that over the past three months, 539,000 Scots have taken on extra debt, through credit cards, loans and higher overdrafts.
Christine Sinclair, convener of the board of Money Advice Scotland, the national umbrella debt advice charity, feared the debt situation would get worse before it gets better.
Ms Sinclair said: "Increases in the cost of living, people struggling to pay credit cards and loans will have a bigger impact to come on people with debt problems. Yes we have seen some impact already, but with the big rises in utilities, gas and electricity, I think it will actually get worse before it gets better."
Bryan Jackson, corporate recovery partner with PKF accountants, added: "The figures tend to indicate it is the better off who are now being hit hardest. While the savings on mortgage payments have undoubtedly delayed the rise in bankruptcies among more affluent Scots it is clear many have been simply treading water only barely able to keep afloat financially."
Gordon MacRae, head of communications and policy at Shelter Scotland, there is a "perfect storm brewing for a rise in homelessness" as Scotland begins to feel the full impact of cuts to jobs, housing benefit.
The figures are the biggest quarterly increase since October 2008, six months after a new debt relief scheme for people with low incomes and few assets saw a massive rise in the number of people using bankruptcy to tackle their debts.
It marks the first quarterly increase in personal insolvencies for a year, when the numbers rose by just 4%.
Debt experts believe the rise is partly down to the greater knowledge about the easier access to bankruptcy. The AiB said the number of people opting for the voluntary protected trust deed, usually taken by more affluent debtors to help write off their debts, rose by 51% on the previous quarter and 6% year-on-year.
More than 750 people opted for a Certificate for Sequestration which was introduced in November 2010 - a 37% increase on the previous quarter. This route to going bust provides less affluent debtors with an easier way to declare themselves bankrupt, with a one-year discharge period rather than three for PTDs.
It emerged yesterday the Scottish economy grew by just 0.1% during the first quarter. The official gross domestic product data from the Scottish Government dashed hopes the economy north of the Border might have enjoyed a meaningful bounce-back from a 0.5% tumble in output in the final three months of last year.
Meanwhile, the mini-spending boom caused by the Royal wedding in April and the spring heatwave, with the Nationwide reporting consumer confidence fell by 51 points between May and June.
Enterprise Minister Fergus Ewing said: "While these new figures mark an increase in personal bankruptcies this quarter, I am encouraged there has been reduction on levels when compared to this time last year."
If you have any questions or comments please do get in touch.
Yuill + Kyle
Debt recovery + Credit control Lawyers, Scotland
T: 0141 572 4251
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