Bankruptcies and debtor payments both rise in latest year, AiB reports

The number of bankruptcies in Scotland rose in 2016-17, from a low point the previous year, but more debt payment programmes were also completed, according to the latest annual report of the Accountant in Bankruptcy (AiB).

There were 4,562 bankruptcies awarded in 2016-17, an increase of 21% compared with 2015-16. A total of 2,233 debt payment programmes were also approved, up 9%. However the report states that: "This outcome was expected following low case volumes in 2015-16 due to a change in legislation and rollout of BASYS, the new bankruptcy case management system."

The number of bankruptcies awarded in 2016-17 was still 32% lower than in 2014-15 and 36% lower than in 2013-14. Debtors applying for their own sequestration accounted for 74% of bankruptcies awarded, and creditor petitions for most of the remainder. Fewer than 1% resulted from trustees in a trust deed applying to the court for a debtor’s sequestration due to the failure of the trust deed.

In addition, 5,470 protected trust deeds were registered, up 16%.

Corporate insolvencies dropped by 6% compared to 2015-16 to 846.

On the repayment side, a record 1,603 debt payment programmes under the Debt Arrangement Scheme were also completed in 2016-17, a 25% increase on the previous year and the highest number since the scheme was introduced in 2004. 

Under DAS, a debtor commits to a debt payment programme which allows them to repay their debts based on their disposable income, while benefiting from protection from creditors who are prevented from taking action against them to recover their debt.

Payments under the scheme amounted to £37.3m, of which at least 90% is returned to creditors.

Creditors also received £29.4m from debtors in protected trust deeds during the year, with an average dividend of 19.8p in the pound. The administration of protected trust deeds is conducted by insolvency practitioners and AiB is responsible for supervision of this process.

£17.0m was returned to creditors in bankruptcy cases. Overall, the average dividend paid to ordinary or preferred creditors in bankruptcy cases was 21.1p in the pound. For bankruptcies concluded where AiB was trustee, the average dividend to creditors was 22.8p in the pound.

AiB chief executive Richard Dennis commented: “This report highlights the challenges but also the successes AiB has faced and achieved over the past 12 months.

“We ushered in the consolidated Bankruptcy (Scotland) Act 2016 in November, which brings together all the various elements of bankruptcy legislation into a single piece of statute for the first time in a generation. Stakeholders are already benefiting from the clarity and accessibility of this new legislation.

“Continued improvements have been made to our IT systems, with a series of upgrades released across the year.

“Work has also continued across the year on the major project to modernise Scotland’s corporate insolvency rules, while policy development work has taken place on the Debt Arrangement Scheme, protected trust deeds and diligence, with further reforms on these mechanisms being brought before the Scottish Parliament in the coming months."

He paid tribute to the "continued commitment, hard work and professionalism of AiB’s dedicated staff".

Click here to view the full annual report and accounts 2016-17.