Debt Arrangement Schemes in Scotland up 35%

The number of people in Scotland starting a Debt Payment Programme through the Debt Arrangement Scheme (DAS) rose by 35% between April and June this year.

The latest figures from the Accountant in Bankruptcy (AiB), Scotland’s Insolvency Service, reveal how many people in Scotland entered insolvency to tackle their debt problems in the first quarter of 2011/12 (April – June, commonly referred to as the second quarter of 2011).

In all, there were 5,319 personal insolvencies in Scotland. This was a 25% rise on the previous quarter – but a drop of 1% on the same time period 12 months ago.

Of those insolvencies, 2,947 were awards of bankruptcy (up 10% on the previous quarter but down 6% on 12 months ago).

What are the different debt solutions in Scotland?

There are a number of ways that people can declare themselves formally insolvent in Scotland:

• The most common way is through ‘debtor applications to the AiB’ to make themselves Bankrupt. 2,459 people did this.

• 1,305 people were awarded Bankruptcy through LILA (the Low Income, Low Asset route into bankruptcy, introduced on 1st April 2008).

• 759 people took the Certificate route into Bankruptcy – a 37% increase on the previous quarter. This route was introduced just last year, in November 2010

• A further 2,372 people entered a Trust Deed. This was a huge increase – of 51% – on the previous quarter, and an increase of 6% on the same period last year.

Debt Arrangement Scheme

Moving on to DAS a total of 643 programmes were approved under the Scheme. This was a 35% increase on the previous quarter – and of 30% compared with the same period a year before.

In the last three months, as the AiB points out, ‘there has been an increased awareness of DAS, due to the development of changes brought in on 1 July aimed at widening access to the Scheme, offering debt management as a viable option to more Scots than ever’.

The DAS scheme must be accessed through a DAS approved money advisor. Up until recently there were limited DAS approved advisors available. However, these people can now be increasingly accessed through local insolvency practitoners.

Growing use of Debt Arrangement Schemes expected

Fergus Ewing, the Minister with responsibility for personal insolvency and debt management in Scotland, commented that he was pleased to see insolvency levels coming down, compared with the same period last year. He also speculated that the recent increase in bankruptcies could be explained by the successful introduction of the Certificate for Sequestration, introduced just last November.

As for DAS, he said: “AiB’s work to raise awareness of the Debt Arrangement Scheme and its benefits – such as the freezing of interest and charges for debtors and at least a 90 per cent return for creditors – has been reflected in the increase in take-up of the Scheme. With more people now accessing DAS, figures suggest it is offering a sensible option to Scots struggling with debt who have sought advice early on. With the changes introduced on 1 July, I fully expect to see continued growth in DAS in coming months.”

James Falla, senior debt expert at Beat My Debt agrees. “With information about the DAS scheme becoming more readily available and access to DAS approved money advisors becoming easier there is little doubt that the numbers of people entering this type of arrangement will increasing significantly in the next year or two” he said.

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