Another bad year for bankruptcies looms

The fact that the number seems to be levelling off and no longer increasing year-on-year has been welcomed, but there should be wider concern at the fact that such a large number of Scots are being made bankrupt. Only a couple of years ago the annual figure was almost half the current total and we now have twice as many Scots pro rata being made bankrupt as in England and Wales.

Ease of access to insolvency is often cited as one of the reasons for the increase – although of course they also have this in England, so it still doesn't explain why the Scottish figures are so much higher. Coupled with a more relaxed attitude to indebtedness this means it is often regarded as more acceptable to be made bankrupt.

Of course, this is correct in many cases as some individuals do find themselves unable to cope with rising costs and static incomes, but for a great many of the severely indebted there are other factors. There is the widely promoted assumption that anyone can have anything they want immediately as indebtedness will not restrict their right to own things immediately. This assumption may have been discouraged in the last couple of years but the repercussions continue to unfold for thousands of Scots who were told they could run up enormous debts without considering how they would ever repay them.

The second issue is the dramatic contraction in the availability of credit. Lenders who previously thought nothing of doubling credit limits on individuals incapable of even meeting the monthly interest payments have now decided to act responsibly and severely restrict access to credit for large numbers of the community. Borrowers that are approved now face swingeing interest charges on credit cards and loans.

So the solution, if we are not to continue to have 0.4 per cent of our population being made bankrupt each year, is to state that 2010 is the year when we will all control our spending, reduce our debts, and start to live in the here and now rather than the never-never. It is a boring and depressing idea because there is not much fun to be had from such a realistic approach. However, the long-term outcome will be a much more prosperous and happier nation.

With planning, wealth will accumulate slowly, which is irritating, but much more sustainable than the get-rich-quick culture that is finally being curtailed.

Bryan Jackson is a corporate recovery partner with accountants and business advisers PKF.