Scottish Debt

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The Enterprise and Culture Committee on the Scottish Executive’s Bankruptcy and Diligence etc (Scotland) Bill have published proposals to modernise the law on personal bankruptcy and to strike a better balance between creditors and lenders.

In the early 1970’s, consumers had a choice of between 2 or 3 credit cards and the option of going to a high street bank to take out a loan. Nowadays, there are over 1300 different credit cards in circulation and the option of going to high street banks, building societies, finance companies and supermarkets to borrow money!

You may have read reports suggesting that the UK have broken through the 1 trillion pound barrier. CAB’s in Scotland are now reporting that there has been an increase of 64% in the average level of individual debt since 2001.

Because of this, there has been a substantial rise in personal bankruptcy and personal insolvency. A suggestion of credit now being too easy to come by has partly been blamed for such increases.

Suggestions of Change

Suggestions have been made to reduce the period of bankruptcy from 3 years to 1 year to come into line with England and Wales. There was also talk about synchronizing payment orders to 1 year (currently 3) as the council added:

“It seems to make no sense for an individual to be discharged and yet still carry forward the burden of payment from previous debts. This seems counter productive particularly for those seeking to restart or continue trading activity”

However, the Scottish Executive was not supportive of this suggestion. Although the suggestion seems attractive, to free a debtor from obligations after 1 year could cause complaints from creditors if a debtor was in employment and able to contribute to their debt for 3 years. There was also concern given the trend of England and Wales, that bankruptcies may accelerate the trend.

Debtors Home

Currently, trustees have no urgency to sell a debtors home. This is generally because the longer a house is left, the value of the property will increase, and therefore the equity in the property will increase.

Suggestions now are to limit the period of selling a property to 3 years. Infact, some even suggest that the home should not be included at all. The problem is that this could cause complaints from creditors, as it would mean that not all assets are considered in bankruptcy.

It was concluded that a “one size fits all” approach as to whether to sell a bankrupts property was not a suitable approach as for some, the sale of a home would be merited for some, but not for others.

In the view of the committee, it would make no sense for bankruptcy proceedings to cause homelessness. Therefore, recommendations are that the Executives ensure its proposals in this part of the Bill are consistent with its policies on tackling homelessness and to bring about any changes that are necessary.

Related Links:

Enterprise and Culture Committee Report
Scottish Parliament Article

Rising Household Costs

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In the past couple of months utility bill costs have seen a gradual increase and now it has been announced that fuel prices are also going to rise, reaching an all-time high. These rises are guaranteed to affect all households in the UK.

The increase in almost all utility bills (water, gas, electricity and council tax) has meant the cost of keeping a roof over your head has now reached a staggering £10,000 a year (above the rate on inflation). This figure has increased by 16% in the last 2 years making it difficult for people to cope with endless bills landing on their doormat.

Across England and Wales there was an increase of 5.5% in the cost of water,  households can now expert to pay up to £294 per year. Energy prices have also iprices rises.jpgIncreased this year, with British Gas increasing their prices in Februray by 22%. They are not alone, as all of the energy suppliers have increased their prices dramtically over the past year. These price increases are becoming more frequent and are expected to rise again in the next few months.

Clysesdale Bank discovered that a quater of first time buyes were influenced by the rising utility bill costs including council tax. The increased costs of running a home combined with rising house prices has lead to less and less people being able to step onto the housing ladder.

At the end of April is was announced that fuel prices are also going to increase. Thursday 28th April 2006 saw the average petrol price reach 96.13p per litre and diesel was 98.81p per litre. People could see their average fuel bill rise by £17.74 per month, all adding to the expence of everyday life.

If 2 million households in the UK are already struggling financially how are they and the rest of the country expected to cope with the rising costs?

Credit may seem the only option to prevent falling into arrears; others may have difficulty in servicing existing debt repayments. There is another way, comparing providers of utility bills by visiting uSwitch can reduce existing energy bills and Petrolprices.com can find the cheapest fuelling station in your area. Other money saving tips may cover the addition cost incurred by the increase in utility bills and fuel.