Nearly 12,000 Scots will be made bankrupt this year, according to accountants and business advisers French Duncan.
The firm said 230 people a week were either sequestrated – the Scottish term for bankruptcy – or forced to take out a Protected Trust Deed (PTD) during 2018, and it predicted a similar figure or more will go bust in 2019.
Last year’s estimated total is the highest level of personal insolvencies north of the border since 2013, with the figures having risen steadily over the past four years.
French Duncan said the figures pointed to an underlying indebtedness within large parts of Scottish society despite “extremely benign and favourable interest rates”.
Rising utility bills, higher food costs and frozen wages mean there are many people unable to clear their debts and paying only the interest, the firm said.
It warned any change in their circumstances – either through unemployment, divorce, ill health or some other reason – would leave these people unable to cope and quickly succumbing to bankruptcy.
These “zombie” debtors are living with long-term accumulated debts without repaying any of the capital, French Duncan added.
Eileen Blackburn, head of restructuring and debt advisory, French Duncan, said: “Although employment levels are extremely high and many individuals will have the lowest mortgage interest of their life, it is clear that for thousands of Scots there is an underlying indebtedness which they are unable to address.
“They may have acquired this debt over a period of many years but cannot do anything but pay the monthly interest.
“Any slight change in their circumstances and they are quickly thrown into a financially precarious position.
“A reduction in overtime payments or slight increases in living costs can tip these individuals over the edge.
“They may then use very high interest short-term loan companies to cover themselves, but this simply exacerbates, rather than resolves, the situation and the debts rapidly accumulate until they are impossible to pay, and the individual will be made bankrupt.
“Long term indebtedness occurs across society among people with homes, jobs and assets but are unable to meet punitive interest rates on historic debt.”
Ms Blackburn added: “Business failures are also rising dramatically – increasing by an estimated 25.8% in 2018, compared with 2017, and the highest annual figure since 2012.
“I would expect around 20 Scottish businesses a week to fail in 2019 which indicates difficulties in certain sectors of the Scottish market.”