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Bankruptcy often the 'lesser of two evils' for those in debt

Citizens Advice Scotland (CAS) have said the increase in bankruptcies shows that many Scots are opting to declare themselves insolvent as the only way to escape un-manageable debt

Figures released today by Accountants in Bankruptcy (AiB) show that there were 5,319 personal insolvencies in Scotland in the first quarter of 2011/12 (a 25 per cent increase on the previous quarter).

CAS Chief Executive Lucy McTernan said,

“The increase in bankruptcies is further evidence that many Scots are struggling with debts which are so significant that they simply can’t pay them off. Such people have limited options available to them, but bankruptcy is one. And it seems many are choosing that route as the ‘lesser of two evils’.

“Nobody wants to be declared insolvent. It is not a soft option. It can be a stressful process emotionally, and can significantly restrict your financial options later in life. It is not a step we would ever advise anyone to take lightly. However, if you are struggling with debt which has become un-manageable, and you really can’t see a way out of it, then bankruptcy can be your only realistic course of action. That’s why we have argued for some of the changes that have made it easier for people to take the bankruptcy route, and it is those changes which have partly contributed to the rise we see today.

“Anyone who is concerned about their debt levels, and is considering the option of bankruptcy, should get advice from their local CAB. Our advice will always depend on the specifics of each individual case, but it is always free, confidential and impartial.

“But the real solution to this problem is to change the whole culture of lending that exists in this country. We need more affordable credit options, so that people don’t get into un-manageable debt in the first place. People on low incomes will always need to borrow money sometimes, but the problem comes when they are exploited by lenders who impose high rates of interest and lend to people who don’t have sufficient income to repay the loan.

“CABs see every day how debt destroys peoples lives. Bankruptcy can be a solution for some, but is never ideal. And these problems could be avoided if there was a culture of more responsible lending, including better public education about debt, and more support for affordable credit services like Credit Unions.”

For more information, interviews etc please contact Tony Hutson on 0131 550 1010 or 07774 751655.

NB This is the number of the CAS Press Office, for use by journalists only. If you are a member of the public looking for CAB advice please contact your local bureau.