BANKS and credit card companies are being hit hardest by new legislation that makes it easier for people on low incomes in Scotland to declare themselves bankrupt, according to a leading insolvency expert.
Latest figures on insolvencies from the Accountant in Bankruptcy service released yesterday show there were 4,735 individual insolvencies in Scotland in the first quarter of this financial year – an increase of 44.6 per cent on the previous quarter
and a rise of 35.4 per cent on the same period a year ago.
However, the rise is predominately as a result of the introduction on 1 April of LILAs, a new route into bankruptcy for people on low income and low assets who previously could not make themselves bankrupt without legal action being taken against them.
David Hunter, the head of business recovery and insolvency at Campbell Dallas chartered accountants, said the LILA backlog of clients would dominate bankruptcy figures for the rest of the year.
"Primarily, banks are going to feel the effect of this because the vast majority of debts are owed to them, although these people may also have store cards.
"We're not sure at this stage if there will be an effect on small businesses, but there may be some effect."
But Liz McVey, manager of the Consumer Credit Counselling Service in Scotland, said: "The banks and credit card companies won't be any worse off as they wouldn't have been getting paid anyway.
"Any money adviser in Scotland would say that many of their clients would never reach that stage of paying off these vast debts."
The full article contains 275 words and appears in The Scotsman newspaper.
