Scottish Statutory Debt Solutions Statistics
October to December 2020
2020-21 Quarter 3
Next update: 28 April 2021
Authors: Catherine McAuley and Ken O’Neill
Responsible statistician: Ken O’Neill (email@example.com)
Data used in this release: Scottish Statutory Debt Solutions Statistics: 2020-21
Provisional figures: All figures for April 2020 onwards remain provisional until final validation (Summer 2021).
Note: These statistics are for the period October to December 2020 and earlier financial quarters, therefore these quarters follow COVID-19 related policies implemented in Scotland from the end of March 2020.
Media enquiries: AiB Communications team (AIB_Communications@gov.scot)
We want your feedback: We welcome any feedback on any aspect of these statistics either by completing a short online feedback form or by email.
Main points for October to December 2020
There were 2,053 personal insolvencies (bankruptcies and protected trust deeds (PTDs)) in 2020-21 Q3, 1,281 less than in 2019-20 Q3 (see chart 1).
For another type of statutory debt solution, the Debt Arrangement Scheme (DAS), there were 1,037 Debt Payment Programmes (DPPs) under the DAS approved in 2020-21 Q3 compared with 822 for the same quarter from 2019-20, an increase of 26.2%.
About this release
This quarterly release contains the latest statistics on statutory debt solutions, statutory moratoriums on diligence, and corporate insolvencies in Scotland.
The statistics are compiled by Accountant in Bankruptcy (AiB), an executive agency of the Scottish Government.
The majority of the statistics presented are derived from AiB administrative records. Estimates for 2020-21 are provisional until final figures are published in July 2021.
Non-statutory debt solutions, where debtors make their own arrangements with creditors or enter informal debt management plans with a debt management firm, are not included in these statistics.
These statistics are for the period October to December 2020 and earlier financial quarters, therefore these quarters follow COVID-19 related policies implemented in Scotland from the end of March 2020.
Bankruptcies decreased by 49.6% in 2020-21 Q3 when compared with the same quarter in the previous year.
PTDs decreased by 31.8% over the same period.
There were 587 applications for moratoria granted in 2020-21 Q3. This is more than twice the figure (279) granted in the same quarter in 2019-20.
Corporate insolvencies decreased from 226 in 2019-20 Q3 to 132 in 2020-21 Q3.
Further comparisons can be found in Table 1 below.
Chart 2 shows the quarterly path of personal insolvencies (bankruptcies and PTDs only) within the year by presenting both quarterly and cumulative personal insolvencies in the current financial year and compares these with the previous financial year.
Debtor: any person who owes money to another.
Creditor: any person, business or organisation that is owed money by another.
Bankruptcy: (also known as sequestration in Scotland) is a legal declaration that someone cannot pay their debts. If a person is declared bankrupt, control of things that they own is passed to a trustee who may sell them to pay money owed to creditors. A regular payment from a person’s income may also have to be made.
Protected Trust Deed (PTD): a form of insolvency that transfers a debtor’s estate to a trustee to be realised for the benefit of creditors.
Debt Arrangement Scheme (DAS): a Scottish Government debt management tool. Allows a debtor to repay their debts through a Debt Payment Programme by giving more time for repayments, free from the threat of enforcement (diligence) or bankruptcy.
Moratorium on diligence: a protection from creditor debt enforcement. This protection is available to individuals as well as certain entities.
No seasonal adjustment
The data used in this release are not seasonally adjusted. We recommend you use year-on-year comparisons (for example 2020-21 Q3 compared with 2019-20 Q3) rather than making quarter-on-quarter comparisons.
Awards of bankruptcy
Bankruptcies in 2020-21 Q3 decreased when compared with the same quarter in the previous year. There were 623 bankruptcies awarded in 2020-21 Q3, a 49.6% decrease when compared with 2019-20 Q3.
Of the 623 awards of bankruptcy, 94.7% came from debtor applications. The remaining bankruptcies came from creditor petitions (5.3%). There were no trust deed petitions in 2020-21 Q3.
Creditor petitions decreased from 276 in 2019-20 Q3 to 33 in 2020-21 Q3. Note petitions are approved by courts with AiB only recording when a petition has been awarded. Therefore, the number of creditor petitions recorded could be influenced by the late reporting of creditor petitions court orders. Under the current revisions policy, quarterly creditor petitions figures are revised quarterly to account for late reporting or missing cases.
It is important to note that the emergency legislation known as the Coronavirus (Scotland) Act 2020 and the Coronavirus (Scotland) (No.2) Act 2020 have been introduced to aid in the response to the emergency situation caused by the ongoing pandemic. Both acts included temporary measures which impact on statutory debt solutions legislation. Further information can be found in the Legislation section.
On emergency measures that are relevant to this section, certain measures are included to improve access to Minimal Asset Process (MAP) bankruptcy. The debt threshold for eligibility is increased from £17,000 to £25,000 and student loan debt has been removed from contributing to this eligibility calculation. This will increase access to a more efficient, quicker and easier form of bankruptcy. These regulations also provide lower cost access to both the Full Administration and MAP routes to bankruptcy, with complete removal of fees for those in receipt of certain prescribed benefits. Debtor application costs for Full Administration are reduced from £200 to £150 and MAP application fees are reduced from £90 to £50. Lastly, the regulations secure extra debtor protection by modifying the eligibility criteria for a creditor to petition for sequestration. This is achieved by raising the amount of money a creditor or a group of creditors must be owed in order to be “qualified” to raise proceedings from £3,000 to £10,000.
While statistics in related to these emergency measures are not reported in this publication, these can be found in another official (experimental) statistics publications - Monthly Scottish Statutory Debt Solutions Statistics (aib.gov.uk)
Debtor applications for bankruptcy decreased by 38.6% from 961 in 2019-20 Q3 to 590 in 2020-21 Q3. There are two types of debtor applications for bankruptcy: MAP or Full Administration. Full Administration bankruptcies decreased by 63.0% from 438 to 162 and MAP bankruptcies decreased by 18.2% from 523 to 428. The majority of bankruptcies awarded through debtor applications are MAP cases.
Chart 3 shows the recent trend in bankruptcies awarded through debtor applications since April to June 2009. The number of Low Income Low Asset (LILA) bankruptcy awards followed the declining trend in overall bankruptcies since 2008-09. There was a spike in activity in April to June 2012 likely as a result of the scheduled increase in fees to access bankruptcy being introduced on 1 June 2012. Legislative and operational changes introduced through the Bankruptcy and Debt Advice (Scotland) Act 2014 (BADA(S)) on 1 April 2015 was the most likely cause for the sharp decline in the number of bankruptcies awarded in April to June 2015. Note that the MAP bankruptcy replaced the LILA bankruptcy in April 2015.
The total awards of debtor applications have increased by 47.8% in 2019-20 when compared with 2015-16. However, this 2019-20 level remains below levels between 2009-10 and 2014-15, and in 2018-19. It is expected that, at the end of March 2021, the 2020-21 level would be lower than the 2019-20 level.
Types of bankruptcy: debtor application
A person can apply to AiB to make themselves bankrupt through a debtor application. To apply for bankruptcy a person must have received money advice from a qualified money adviser (for example from a local authority money advice unit or Citizens Advice Bureau). The two types of debtor application for bankruptcy in Scotland are:
Minimal Asset Process (MAP): for people on a low income who do not own property and have very little in savings or other assets. Conditions for a MAP are if a person’s debts are at least £1,500 and not more than £17,000, or own assets not exceeding £2,000. A debtor will be discharged after six months, if they continue to meet the MAP criteria, (cases will be converted to Full Administration where it is found that debtors do not meet MAP criteria). MAP replaced the LILA bankruptcy in April 2015.
Full Administration: when conditions set out in MAP are not met. Conditions for Full Administration are if a person’s debts are over £3,000, or own assets valuing £2,000 or above.
Types of bankruptcy: creditor and trust deed petitions
Creditor and trust deed petitions can be granted by a sheriff court.
Creditors can ask a sheriff to award bankruptcy against a debtor if:
they are owed at least £3,000 or they apply for a joint petition with other creditors provided that the combined debts are at least £3,000; and
they have sent the Scottish Government’s Debt Advice and Information Package to the debtor before making the petition; and
they can show that the debtor is apparently insolvent (i.e. when they appear not to be able to pay their debts). Sheriffs require evidence to support this.
If a debtor has not cooperated with a trustee in a trust deed, the trustee has the right to apply to a sheriff to make the debtor bankrupt if they believe this is in the creditors’ best interest. The trustee does not have to demonstrate the previous conditions.
In Scotland, a trustee is appointed to administer each bankruptcy. The Accountant in Bankruptcy (The Accountant) will be the trustee unless an insolvency practitioner is nominated to act. In all cases awarded under MAP, The Accountant must act as trustee.
In the third quarter of 2020-21, The Accountant was appointed trustee in 557 cases awarded, 89.4% of bankruptcies for the quarter. This is particularly due to the fact that around 72.5% of bankruptcies awarded through debtor applications in this quarter are MAP cases.
A debtor in a bankruptcy will normally be bankrupt for one year. After this period they may be discharged. Although the debtor is discharged, the administration of the bankruptcy continues until the trustee has dealt with all of the estate and accounted for their work so that they can seek their own discharge. A debtor must continue to cooperate with the trustee until the trustee’s discharge.
In 2020-21 Q3, there were 717 debtors discharged and 918 trustees discharged, a 33.9% and 28.3% decrease respectively when compared with 2019-20 Q3.
Debtor applications for bankruptcy
Not all debtor applications for bankruptcy result in an award being made and applications can be rejected (criteria for bankruptcy not met), returned (application errors) or withdrawn.
In 2020-21 Q3, 559 debtor applications for bankruptcy were received by AiB compared with 966 received in 2019-20 Q3. The trend in debtor applications may follow a similar trend to bankruptcies awarded.
Protected Trust Deeds
There were 1,430 PTDs registered in 2020-21 Q3, a 31.8% decrease on the same quarter in 2019-20. The number of PTDs have followed a similar trend to bankruptcies and had been generally increasing between 2014-15 Q4 and 2019-20 Q1, before gradually declining in 2019-20 Q2 (see chart 4).
As with awards of bankruptcies, the trend in PTDs registered is likely to be affected by legislative and operational changes. For example, the BADA(S) reforms, introduced from 1 April 2015, aligned the payment period in bankruptcy and PTDs to 48 months. Prior to this, those agreeing to a PTD were typically paying contributions for an additional year compared with those in bankruptcy. These changes have likely led to an increase in PTD activity levels.
In 2020-21 Q3, more PTDs were registered than bankruptcy awards, as has been the case since 2015-16 Q1.
A debtor in a PTD is normally discharged after 48 months. If the debtor makes the agreed payments, and cooperates with the trustee then the trustee will apply to AiB for the debtor to be discharged.
After the debtor has been discharged, the trustee may remain in office as long as necessary to conclude the administration of the trust deed.
In the third quarter of 2020-21, there were 958 debtors discharged and 630 trustees discharged, a 2.3% and 55.3% decrease respectively when compared with 2019-20 Q3.
What is a Protected Trust Deed (PTD)?
A PTD is a formal debt solution where an agreement is made between a debtor and creditors to repay part or all of their debt.
The debtor conveys their estate to an insolvency practitioner (the trustee) to administer for the benefit of creditors and the arrangement normally includes a contribution from income for a set period.
Provided the debtor complies with the terms of their deed, the creditors can take no further action to pursue the debt or to make the debtor bankrupt. This is similar to Individual Voluntary Agreements in England and Wales, although there are important differences in the way they are set up and administered.
Insolvency Practitioner: a person (usually, but not necessarily, a chartered accountant) licensed and authorised to act as a trustee in sequestrations or trust deeds.
Trustee: person who administers a bankruptcy or trust deed. In sequestrations, a trustee can be either the AiB or a private insolvency practitioner. In trust deeds, trustees must be an insolvency practitioner.
Debt Arrangement Scheme
The Debt Arrangement Scheme (DAS) is a statutory debt management solution administered by AiB. Under the DAS, a debtor commits to a Debt Payment Programme (DPP) which allows them to repay their debts based on their disposable income while they are protected from creditors taking any action against them to recover their debt. If the DPP is approved, all interest, fees and charges on the debt will be frozen and waived if the programme is completed in full.
Approved DAS applications
In 2020-21 Q3, there were 1,037 approved DPPs under the DAS compared with the 822 approved in 2019-20 Q3, an increase of 26.2% (see chart 5). The number of approved DPPs under the DAS increased year-on-year between 2006-07 and 2012-13 were likely due to changes in legislation and improvements to the DAS Administrator’s IT system (see the background section for more information on legislative changes).
The sharp decrease in the DAS approvals in 2015-16 (from 4,156 to 2,043) was likely due a number of reasons including legislative changes and the availability of DAS from insolvency practitioners. The attractiveness of the DAS relative to other statutory debt solutions could have also been affected by changes to regulatory procedures, operated by the Financial Conduct Authority, in relation to money advisers and insolvency practitioners.
Completed and Revoked DAS cases
A DPP reaches completion when the debt in the DPP has been paid in full, minus the fees paid to the DAS Administrator and the payments distributor. There were 420 DPPs under the DAS completed in 2020-21 Q3, a 7.5% decrease when compared with 2019-20 Q3.
The volume of DAS completions will depend on activity levels several years earlier with the average expected length of a DPP under DAS being around six years. We can expect a lower but steady volume of completions in line with current applications approved compared with previous completion levels.
A DPP is automatically revoked if either the debtor is made bankruptcy, enters a trust deed which becomes protected, or other grounds. There were 173 DPPs under the DAS revoked in 2020-21 Q3, a 4.8% increase when compared with 2019-20 Q3.
Amount repaid under the DAS
In 2020-21 Q3, around £9.8 million was repaid from debtors under the DAS compared with the £9.4 million repaid in 2019-20 Q3. Since the DAS (Scotland) Amendment Regulations 2018 came into force on 4 November 2019, through DAS, creditors receive a minimum of 78% of the debt owed to them from debtors (after DAS Administrator and payments distributor fees). Prior to this, the minimum was set at 90%. After the DAS Administrator and payments distributor fees have been deducted around £8.7 million was paid to creditors in 2020-21 Q3.
Short term financial crisis payment break
The Debt Arrangement Scheme (Scotland) Amendment Regulations 2018 came into force on 04 November 2019. These Regulations introduced improvements to the DAS to increase the accessibility and sustainability of DPPs and to offer greater flexibility. These included short term financial crisis payment break. Money advisers can automatically process a variation to excuse a missed payment if their client has suffered a short term crisis and cannot make their payment. As there is no requirement for the full variation application, it is an instantaneous process. Money advisers have discretion as to the “crisis” definition and must annotate the application with the reason for approving the variation. Client may have up to 2 months’ worth of crisis break variation approved in any rolling year.
Since these Regulations were introduced in the middle of 2019-20 Q3, it is too early to make year-on-year comparisons. Instead, we can report the following main finding:
In the 12 months to the end of December 2020, a total of 3,193 applications for crisis payment break had been approved under the new regulations, which accounts for around 41.6% of the overall number of applications to vary a DPP.
57.6% accounts for the number of approved standard applications to vary a DPP, and under 1% accounts for the number of rejected applications.
DAS applications and rejections
In the third quarter of 2020-21, 1,040 applications for a DAS DPP were received by AiB. In the same quarter, 4 applications were rejected.
Variations to a DAS DPP
If a debtor’s circumstances change and they can no longer afford the agreed payments, or if they want to increase the level of payment, they can apply for a variation to their DAS DPP. Variations can also include a change to the length of the DPP or attaching a new condition.
The following type of variations are included in this publication:
A special type of variation called short term financial crisis payment break is also considered in this publication. A money adviser can approve a crisis payment break to excuse a missed payment if their client suffers a short term crisis and cannot make their payment.
In the third quarter of 2020-21, 1,854 applications to vary a DPP under DAS were approved while 27 were rejected. The number of approved variations was 13.5% of live DAS cases.
Revocations to a DAS DPP
A DPP is automatically revoked if the debtor is made bankrupt or enters a trust deed which becomes protected. There are also a number of grounds where the debtor, a money adviser acting on behalf of the debtor or a creditor in the DPP can apply to revoke a DPP, for example:
Debtors failed to satisify a standard or discretionary condition
Debtors made a false statement in their application
The debtors failed to make the agreed instalment under the DPP and they are currently in arrears of an amount equal to two instalments
The conditions for a joint DPP as specified in regulation 22(1) or 22(2) no longer apply.
If the DPP is revoked, the debtor may be liable for all interest, fees, penalties and other charges that would have been payable had the DPP not been approved.
A total of 171 applications to revoke a DAS DPP were approved in the third quarter of 2020-21 and 193 were rejected. Overall, 173 or 1.3% of live DAS cases were revoked during 2020-21 Q3.
Statutory Moratorium on Diligence
A moratorium provides protection from creditor debt enforcement. This protection is available to individuals as well as certain entities. Individuals can request a moratorium if they need a period of breathing space to consider whether to apply for bankruptcy, a trust deed or the DAS.
Due to the current COVID-19 pandemic, emergency legislation has been enacted to extend the duration of the moratorium from six weeks to six months temporarily. In addition to this, under normal circumstances a moratorium cannot be granted more than once in any 12-month period. This rule has been set aside temporarily as a result of the pandemic.
Overall, there were 587 (debtor and entity) applications for moratoria granted in 2020-21 Q3. This is more than twice the figure (279) granted in the same quarter in 2019-20.
Moratorium on diligence
A protection from creditor debt enforcement. This protection is available to individuals as well as the following entities:
a trust in respect of debts incurred by it
a partnership (including a dissolved partnership)
a body corporate
an unincorporated body
a limited partnership (including a dissolved limited partnership) within the meaning of the Limited Partnerships Act 1907, or jointly by, as the case may be, the trustees, partners or members of any of those persons.
AiB is responsible for devolved elements of corporate insolvency. The Scottish Government’s competence is limited to the process of company liquidation and receivership, and the management and maintenance of the Register of Insolvencies (RoI) regarding insolvency of individuals and businesses in Scotland.
The RoI contains details of liquidation and receivership of Scottish businesses which are wound up by either a Sheriff Court or the Court of Session. AiB is required to be notified of all company liquidations and receiverships in Scotland.
The statistics presented below are based on the date the insolvency was registered on AiB’s administrative system. There is a time lag between the dates when a corporate insolvency is awarded or a Members’ Voluntary Liquidation (MVL) is registered and when AiB receives notice. The figures, therefore, reported by AiB may not exactly reflect the number of corporate insolvencies awarded or members’ voluntary liquidations registered in a quarter.
It is important to note that the statistics on corporate insolvency statistics presented here differ from equivalent statistics from The Insolvency Service, who source their data from Companies House. Differences are mainly due to AiB using its own administrative system’s data rather than the start date of the insolvency. Corporate insolvency statistics produced by The Insolvency Service are available here: Company Insolvency Statistics Releases - GOV.UK
Table 2 shows corporate insolvencies by type between 2019-20 Q1 and 2020-21 Q3. Corporate insolvencies include receiverships appointments, compulsory liquidations and creditors’ voluntary liquidations. In the past, the majority of corporate insolvencies used to be compulsory liquidation. However, since 2020-21 Q1, the majority are creditors’ voluntary liqudations. Creditors’ voluntary liquidations increased by 6.3% between 2019-20 Q3 and 2020-21 Q3. Compulsory liquidations decreased by 67.8% over the same period.
Overall, there were 132 corporate insolvencies in 2020-21 Q3 compared with 226 in 2019-20 Q3, a decrease of 41.6% (see chart 7).