Accountant in Bankruptcy figures show long term decline continues.
The latest quarterly figures from Accountant in Bankruptcy show Scottish total personal insolvencies, which include both bankruptcies and protected trust deeds, are 25.4 per cent lower than in the same quarter a year ago.
In the second quarter of 2015-16 up until 30 September, a total of 2,230 personal insolvencies were recorded, significantly down on the same period a year ago.
The statistics also show fewer companies in Scotland going bust, with 180 Scottish-registered businesses becoming insolvent. This is a 13.9 per cent drop on the same quarter a year ago and 8.6 per cent down on the previous quarter. There were no companies at all entering receivership during the quarter.
Personal insolvencies in Scotland have been dropping consistently since 2008-09, and the numbers fell significantly in the first quarter of the year, which signalled the first months since the legislation governing bankruptcy was amended on 1 April, 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 bankruptcy and a Common Financial Tool to promote consistency in assessing 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 show this Minimal Asset Process (MAP) route into bankruptcy, which replaces the Low Income Low Asset process, is providing access to debt relief for those most in need. Of the 697 debtor applications for bankruptcy in the current quarter, 50.9 per cent were MAP cases.
The number of protected trust deeds recorded and bankruptcies awarded both rose over the quarter compared to the last, indicating the money advice sector and those seeking debt relief are becoming familiar with the wide-ranging reforms to personal insolvency introduced in April.
However, debt payment programmes approved under Debt Arrangement Scheme, fell by 14 per cent compared to the previous quarter to 456, which is the lowest number of approved programmes since 2011.
The total repaid through the Debt Arrangement Scheme continues to increase, though, with £9.6 million repaid, up 1.5 per cent on the previous quarter. This reflects a general decrease in the uptake of debt management products in Scotland and the trend of reducing personal insolvency across the UK and overseas.
Evidence from the money advice sector suggests creditors are now more inclined to agree to informal non-statutory debt management plans, which can freeze interest and charges, but offer less protection than the Debt Arrangement Scheme.
Recent legislative and operational changes to the scheme may also have had an impact on the volume of approved debt payment programmes.
Commenting on the latest figures, Business Minister Fergus Ewing said: "The longer term trend of people falling into financial difficulty and seeking debt relief continues to be a declining one, which will be welcomed by everyone who wishes to see Scotland prosper.
"Fewer businesses becoming insolvent also means more people can remain in work, which is good news for industry and provides further evidence that Scotland's economy goes from strength to strength."
A full statement of Scotland's insolvency statistics for the second quarter of 2014-15 is available here – (http://www.aib.gov.uk/about-aib/statistics-data/quarterly-reports)
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