'Record increase' in bankruptcies

The PKF said many people were teetering on the brink of insolvency

The number of Scots declared bankrupt is rising at record levels, figures have revealed.

Finance experts PKF said in the third quarter of 2008, 5,998 people had been made bankrupt or entered a voluntary repayment agreement with creditors.

The firm said this was an increase of 26.7% on the previous quarter and a 70% rise on the same quarter of 2007.

A total of 14,008 Scots have been made bankrupt so far this year, while the total figure for 2007 was 13,814.

PKF said around 20,000 Scots could be declared bankrupt by the end of 2008.

Between July and September, there were 4,055 sequestrations - the Scottish term for bankruptcy - and 1,943 Protected Trust Deeds (PTDS) - a voluntary repayment agreement when debtors pass their estate to insolvency practitioners and negotiated repayments are made with creditors.

Today's figures are a warning to Scots to take control of their debts before it becomes too late Blair Nimmo KPMG

PFK said sequestrations had increased by 42% on the previous quarter and 162% on the same quarter a year ago.

The number of PTDs taken out rose by 3% on the previous quarter and fell by 1.9%, compared with the same period in 2007.

Anne Buchanan, corporate recovery partner with PKF, said: "These are individuals who would already have been severely stretched financially and found that sources of finance have simply dried up in the last quarter and they have had to take the extreme response of being made bankrupt or of undertaking a protected trust deed.

"It is clear that we still have some way to go before the numbers stabilise as the true impact of the credit crunch is only beginning to filter through to the wider economy.

"As the impact of the global economic situation spreads we are likely to see rising unemployment coupled with falling house prices trapping many individuals in a spiral of increasing debt and falling asset values."

'Spend recklessly'

She added that although the drop in interest rates was welcome, it would take some months to filter through, with many "teetering on the brink of insolvency."

"Christmas is always a difficult time of year financially, but it is essential that individuals don't simply ignore their financial problems as there will be an enormous fallout in the New Year if they spend recklessly in the next seven or eight weeks," she said.

Blair Nimmo, from accountants KPMG, said: "These figures are of grave concern - as the credit crunch bites many creditors are tightening their lending policies to consumers and requiring existing payment plans to be met.

"For those struggling with the increased cost of living, meeting current repayment plans can push them into bankruptcy.

"Today's figures are a warning to Scots to take control of their debts before it becomes too late - with recent conditions the pressure can only increase."

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