With the exception of the second quarter of 2020 — the first impact of Covid-19 —, you have to go back to the beginning of 2011 to find so few individual insolvencies. Employment, financial literacy, real estate and banking help explain. But family difficulties persist.
The number of new personal insolvencies declared by courts fell sharply to 1,240 in the third quarter, according to data from the Ministry of Justice. With a reduction of 25.3% compared to the previous three months, and 24.9% compared to the same period last year, a historically low value was reached, only comparable, in recent years, to the period in which the Troika landed in Portugal.
Between January and March 2011, on the eve of the Government requesting international financial rescue, the number of personal insolvencies reached 1,021, and in the following three months 1,242. It was just the beginning of an escalation that peaked between 2012 and 2016, with the peak being reached at the end of 2014 (3,100 cases). In the last decade there has been a progressive reduction, with stabilization in the post-pandemic years between 1,500 and 1,800 insolvencies per quarter.
In between, a statistical anomaly, from April to June 2020, when Portugal was in a pandemic state of emergency: there were only 1,132 insolvencies declared by the courts of first instance.
Even considering the nine months ending in September, in which there were 4,612 personal insolvencies, the reduction is significant: 13% less than in 2024. In almost 15 years, the number of cases until September was only lower, and by a small margin, in 2021 (14 fewer insolvencies) and 2020 (129 fewer), years of limbo in which the moratorium on housing credit was in force. Before that, we need to go back to 2011 (3,593 insolvencies).
More problems, less debt
One of the most relevant factors for personal insolvency is the evolution of the job market. “And the truth is that our unemployment rate is historically low”, highlights Natália Nunes, coordinator of Deco’s financial protection office, speaking to Jornal Económico. António Emílio Pires, president of the Portuguese Association of Judicial Administrators (APAJ), also notes that “we are practically in a situation of full employment, with the unemployment rate at a low level that has not been seen for a few years”. Between July and September, it reached 5.8% — in more than two decades, the quarterly rate was only reduced further in the second quarter of 2020 (5.7%) and, before that, in 2002 (already in another INE series). “People are able to earn income and more or less meet their commitments”, says António Emílio Pires. “This has reduced the number of insolvencies.”
However, these numbers do not mean that the difficulties have disappeared. “What we see now are more families with financial difficulties, but they no longer have the problem of housing credit”, highlights Natália Nunes. “People are no longer under as much pressure because the weight of credits is not as great as it used to be”, despite the fact that debts related to the purchase of a house “continue to have a great weight”. The lower incidence of this problem “also contributes to the fact that there are not so many families going to court to request a declaration of insolvency”, explains the Deco coordinator.
António Brás Duarte, vice-president of the Order of Solicitors and Execution Agents (OSAE)—who deal with these cases at a later stage—also focuses on reducing debt. “Non-performing credit is starting to be an old expression, it is no longer current”, emphasizes the representative of the order. These bank loans, which are unlikely to be repaid or will be paid more than three months late, represented in 2023 and 2024 just 0.8% of all loans granted to individuals, the lowest value since at least 2009, according to the Bank of Portugal.
António Brás Duarte also understands that today there is better money management on the part of families and “a greater investment capacity”, particularly in real estate.
Selling a house is easier
Despite it being very difficult to buy a house, the housing market itself has been part of the solution for those in difficulty, considers Natália Nunes. “The real estate market has been increasing its price a lot, which has ended up working very much in favor of families”, says the person in charge. “We saw recently, with the increase in Euribor, people having their payments more than doubled, but they ended up finding solutions” that did not exist during the Troika crisis, “such as putting their house up for sale and quickly being able to sell it”, he explains. “What was a problem is no longer a problem.” Or, at least, it is no longer a dead end: “Of course, then they have another problem, which is finding new housing, but, in a way, they manage to find solutions that do not lead to the situations of 2012 and 2013, with families, in desperation, handing over their homes to banks, moving towards insolvency processes”.
Bank finds answers
On the other hand, “the banks themselves also have another stance, which they did not have in the previous crisis”, during the financial rescue, highlights Natália Nunes, “namely finding answers”.
In this crisis, in which unemployment reached a peak of 16.5% in 2013, many families had to hand over their homes to pay their debts and, even so, in several cases, they were unable to pay off everything they owed. As António Emílio Pires, president of APAJ, recalls, “people started to do the math”, concluding that it would be easier to resort to personal insolvency — an instrument that was rarely used before the Insolvency Code (of 2004) and that only began to be more widely used with the European debt crisis.
Natália Nunes also recalls that today there are “other legal instruments that protect the interests of banks and families”, namely legislation that, “in a way, obliges banks to truly monitor the proper execution of contracts”. Which means contacting customers if they see signs of degradation, “to propose solutions that avoid non-compliance”.
Furthermore, “people are much more informed”, notes Natália Nunes. For many years, “families that were moving towards insolvency had no idea what mattered, what the consequences of being in this process were”, while currently “there are not many of these reports anymore”, observes the Deco coordinator. Still on financial literacy, António Emílio Pires believes that “people today are more enlightened about easy credit”.
So could insolvencies fall even further? For António Brás Duarte from OSAE, although the situation is better, “it is important that the financial system is attentive and prevents bad credit from growing again”. Natália Nunes, on the other hand, confesses to having “some fear that these numbers will not continue to fall”. Despite verifying that there is “some more income available” and several cases of “less indebted families” — some of which “have even gone through insolvency processes some time ago” — have also “used more credit”, as shown by data from the Bank of Portugal. And we still have to take into account “the increase in the cost of living” and “the unknown burden of housing”.
