WAGE freezes, rising utility costs and a growing dependence on high-interest payday loans have been blamed for a surge in the number of personal insolvencies in Scotland.
The report by Accountant in Bankruptcy (AiB), the body which supervises all personal insolvencies in Scotland, reveals the number of Scots declared bankrupt in first three months of 2012 have shot up by more than one-quarter.
It also shows that in the three months to the end of March, 5601 individuals were declared insolvent, an increase of 14.9% on the previous quarter and up 5.3% on the same period in 2011.
Personal insolvencies include both bankruptcy awards and Personal Trust Deeds, a voluntary arrangement available in Scotland whereby the debtor transfers their estate to an insolvency practitioner who arranges to repay part of the debt to creditors on the debtor's behalf.
A breakdown of the figures reveals there were a total of 3310 personal bankruptcies from January to March, up 26% on the previous quarter and 12.3% on the same period last year.
Rates of bankruptcies are also higher north of the Border, with 0.39% of the population in Scotland declared bankrupt over the 12 months to march compared to 0.24% in England and Wales.
Prior to the banking crisis total personal insolvencies in Scotland were averaging around 13,500 a year, with around 5800 bankruptcies. In 2008/9 that shot up to a peak of just under 23,000 in 2009/10 for personal insolvencies and a high of 14,777 bankruptcies in 2008/9, figures which have both been gradually declining over recent years. Last year there were 11,056 bankruptcies from a total of 20,250 personal insolvencies.
However, experts believe yesterday's figures may point to a fresh climb in people seeking legal resolution of their debts.
Bruce Cartwright, head of business recovery services at PwC in Scotland, said: "While we are seeing a drop in the number of credit cards in circulation with the consumer credit market contracting and a fall in unsecured borrowing, this may not simply be the result of cautious consumers paying off debt. There is a real risk people are instead turning more and more to other products such as payday loans, a service that at present is only subject to light regulation."
Citizens Advice Scotland said its advisers had dealt with 400 debt cases every day last year, and warned the figures could be even higher if they had not been able to steer clients away from insolvency.
Joanna Elson, OBE, chief executive of the Money Advice Trust, added: "The insolvency figures only represent the tip of the iceberg when it comes to the scale of debt problems faced by households across Scotland. Our research suggests Scotland faces a 21% rise in debt problems over the next two years, as a result of the high proportion of public sector employment, where many jobs are at risk."
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