The number of private bankruptcies fell 3.8% last year, far from the peak recorded at the height of the crisis, but the fall reflects the growing number of insolvencies that are being replaced by debt settlement plans.
After years of depressing rises in Portugal’s personal insolvency figures, there were still 12,000 families that declared bankruptcy in 2015, the use of payment plans mediated by the courts continues to grow, rising nearly 40% in 2015.
The Commercial Informational Institute (IIC), a credit management consultancy which collects information from public databases, shows that last year 12,345 insolvencies were issued to individuals, an annual decline of 3.8%.
Private bankruptcies handled by the court system in 2008 numbered only 784 cases. The following year the number rose to 1,452 and by 2013 the number of households unable to pay their bills and declaring bankruptcy was an astounding 13,000.
Although the number of insolvent households is falling, more and more individuals are using alternative mechanisms, the main one being the Special Revitalisation Process (PER) which was created by the previous government in 2012.
The use by individuals of this legal remedy was slow at first with only 89 people applying in the first year. By 2014 there were 1,163 cases, and in 2015 there were 1,600 families that were able to negotiate with lenders in this way.
Many had assumed the PER process was for companies only, but gradually the public realised they could use the scheme in the face of insolvency. The PER system is quick, does not have such a negative connotation as bankruptcy nor the draconian consequences – Portugal is not a kind or friendly place if you are unable to pay your way.
More people are choosing the PER process, instead of insolvency, to buy time as the scheme allows them to negotiate a payment plan with creditors for at least six months. This allows many people some time to rethink and regroup finances.
Many PER cases anyway end up as insolvencies when people are unable to stick to their reduced repayment plans but it is there to be used by individuals and companies alike.
Comments
The next step down the road, as begins soon in Greece, is for these NPL's to be sold off to debt collection agencies. Usually foreign. Having paid no more than 10% of the value of a property they have every incentive to get it cleared and sold on. Which will then really strain any previous arrangements made ....