The Two Faces Of The Recession That Cause Misery To Millions, says Bankruptcy Advice Company...

The current economic climate is telling two seemingly conflicting stories about how Scottish citizens are coping – and leaving millions in misery as a result, says Bankruptcy Advice Company, Sequestration.net.

 

The recent report from the Accountant’s in Bankruptcy (AiB) showed a sharp rise in the number of sequestrations between April and June, an effect of the austerity regime set in motion by the UK government. Increased redundancies and a tightening of benefit awards means people are struggling to make ends meet at a time of rising household bills – and sequestration is the result.

 

But it’s what lies behind the figures that reveals two seemingly conflicting stories. One the one hand it’s the affluent citizens who are now being hit the hardest, not the poorest. The AiB figures show a 51% rise in the number of Protected Trust Deeds (PTD) last quarter. These are likely to be middle income households with long-standing debts they can no longer control due to tightening credit lending policies by banks and building societies. PTDs have fewer restrictions than other types of debt management solutions and are favoured by homeowners with assets.

 

A spokesperson for Bankruptcy Advice Company, Sequestration.net, said: “A lot of people think it is only the poorest in society who are suffering, but nothing could be further from the truth. It is possible to have a big house and lots of possession and still go bankrupt because in reality, all of your money is tied up in things. Big houses take a while to sell, so there’s no quick cash fix there, and if someone’s financial circumstances has worsened the lenders will still turn them down for a remortgage if they believe the risk of defaulting is too great, regardless of how much equity there is in their house. Eventually there’s no cash left to pay their bills with and everything collapses.”

 

“A great many people who ring us for advice on Scottish Trust Deeds and the Debt Arrangement Scheme (DAS) seem on the surface to be relatively comfortable, but often much of their material wealth has been bought with credit cards, loans and overdrafts. It’s a house of cards that eventually comes down.”

 

An increase in interest rates could help stimulate the economy into growth and help the more well off citizens who rely on financial products like bonds and savings for income, but therein lies a problem and the second story of the current economic conditions. Once the number of PTDs are taken out of the figures, what’s left is the number of personal insolvencies which have fallen since the same time last year. So at the moment, the low interest rates are keeping tens of thousands of less well-off citizens from tipping over the edge into Sequestration.

 

“It’s a catch-22 situation with no solution,” said the spokesperson. “Unfortunately, sooner or later the interest rates will have to go up to allow us to get a better grip on inflation, and that could send a frightening number of people to the Insolvency Practitioners for Sequestrations, Scottish Trust Deeds and Debt Arrangement Scheme payment plans. Unfortunately, the worst may still be to come.”

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Write Off Unaffordable Debts

In most circumstances an award of Bankruptcy will allow you to write off most of what you cannot afford to repay, i.e. liabilties such as unsecured loans and credit card debts will be dealt with by your Trustee. Note: There are some debts that cannot be written off. Click here* for more information on the limitations.
 

Free From Debt Pressures

Unlike a Trust Deed Scotland, Sequestration can make you totally free from provable debts, although you will have to make a contribution from your income for 3 years if you can afford to. Your Trustee takes over dealing with your creditors and you will be totally debt free subject to some limitations depending on your circumstances.
 

Government Legislation

A Sequestration is under the control of the Scottish Government and is intended to help people who are struggling wither finances. An award of Bankruptcy is not a debt management plan or IVA, meaning there are no regular monthly repayments to make, if you have no surplus income after meeting your normal monthly outgoings.

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