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Insolvency rate rising for Scottish homeowners

In Scotland, the number of homeowners being declared insolvent has risen rapidly since 2008, a new report has revealed.

In 2008, heraldscotland.com reports, just 33% of people entering a Protected Trust Deed were homeowners. Last year, however, that figure jumped to 47%.

Essentially the Scottish equivalent of an IVA, a Protected Trust Deed can provide people in Scotland with an alternative to bankruptcy/sequestration.

Today, the number of insolvencies among Scottish homeowners is rising fast - and the trend, according to heraldscotland.com, `is being blamed on the well-off no longer being able to use rising equity in their homes to finance their lifestyles and pay off debts, given the slump in the property market and the reluctance of banks to issue credit`.

The report was compiled by accountants PKF, whose corporate recovery partner Bryan Jackson commented: "The figures are deeply concerning, given they seem to indicate that debt levels in Scotland are increasing and hitting homeowners the hardest.

"Obviously, for most of the individuals who took out a Protected Trust Deed during 2009, their indebtedness had probably been accumulating over a number of years and they were simply pushed over the edge in the last year.

"Of great concern is the increase in homeowners who have been made bankrupt. This is probably the group who, during the housing boom, used rising equity in their homes to fund their lifestyle and now that this source of revenue has dried up they find themselves with limited equity and rising costs and are unable to cope."

So far, in the year 2009/10, there have been 10,584 bankruptcies and 7,155 Protected Trust Deeds in Scotland, according to the latest figures from Accountant in Bankruptcy, Scotland`s Insolvency Service, leading to a total of 17,739 personal insolvencies.

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