In September two apparently contradictory headlines appeared in Glasgow’s Herald newspaper. The first stated that there had been a ‘Massive Drop in Scottish Court Cases Since 2008’. Indeed the latest figures disclose a decrease of some 54% in court actions from 2008 to where we are today. Two thirds of them were settled in favour of the creditor. The second headline declared a ‘Rise in Householders Struggling to Pay Bills’.
The uninitiated may think that if there has been a massive drop in debt recovery court actions then the general populations level of debt is decreasing. How does this equate with debt levels rising?
The answer is simple. A drop in the number of debt actions can be the result of a number of factors. For example, in relation to commercial debt – and the figures don’t differentiate between commercial and consumer debt - creditors may reduce the number of cases which they pass for litigation because they are being more selective which actions should be taken to court. This may be because they have profiled their debtors more accurately and concluded that they are not worth suing because their customer does not have the assets to satisfy the court’s judgment. There will be no point in trying to get ‘blood out of a stone’. Another reason may be that creditors are more careful to whom they are advancing credit and are profiling their customer base more astutely. In short this will mean that their actual level of defaulting customers should reduce. Following on from this they will not need to take as many court actions.
There are a host of reasons why the number of court actions raised has reduced which have nothing to do with the level of debt which many individuals face. It will be obvious that there are volumes of ‘involuntary debtors’. Such people may be unable to pay their fuel or utility bills and also struggle to pay their council tax. These persons who through no fault of their own struggle to pay their bills are in an entirely different position to a business who are slow payers and will only settle their debts once a creditor initiates court action.
So the conclusion is that a reduction in debt court actions does not necessarily correspond with a reduction in those individuals who simply cannot pay their household bills. Those whose opinion that it does are simply wrong.
For further infomation please contact Stephen Cowan on 0141 572 4251.
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