Benefits and money advice 

Benefit check – you should complete a benefit check to make sure you are claiming all eligible benefits to increase income. 

Compare providers – switch and save. There are many comparison websites to help compare fuel or service providers. Switching to a lower cost provider will lower your expenditure which in turn gives you more money to spend elsewhere that is needed.

Budgeting and/or debt

What should I do if my income drops and I cannot afford to pay my debts? 

If you find yourself in a situation where you can’t afford to pay your bills or debts you should not borrow more money. If you take out more credit now, you could end up in a worse situation when things get back to normal. You should also not rush into an insolvency option, such as a Protected Trust Deeds, Bankruptcy or Debt Arrangement Schemes. If you are considering one of these options, you should always speak to a debt advisor first to ensure that you understand what it means and the consequences. During the coronavirus pandemic you should try to maintain payments to your priority bills, which are your mortgage or rent, Council Tax, gas, electricity and any magistrates’ court fines. If you are struggling to pay these bills, please see step two.

When you experience a financial income shock, one of the first thing you should do is draft a household budget, so you can see what you have coming in and what you have going out. 

This is important, as what you want to avoid is a deficit, where you have more going out than you have coming in.

When you are drafting a budget, it is important to ensure you prioritise your expenditure, so certain outgoings are more important than others. So examples of expenditure you should prioritise are:

• Rent and mortgage payments;
• Gas and electricty bills;
• Current council tax payments;
• TV Licence;
• Hire Purchase/PCP agreements for cars;
• Child maintenance.

This is not an exhaustive list, there may be other items. We call these bills priority debts because the consequences of late payments can be serious: you can lose your home, have your fuel supply cut off or even be sent to prison. If you are behind on these bills you must negotiate repayments for them quickly to prevent a crisis. Work out what you can offer to pay monthly or weekly and contact the billing company. If you need help negotiating affordable repayments for your priority debts contact our service. You should not prioritise your debt payments over these.

Debt Payments

Debt payments should not be prioritised over the above payments, as there are other ways these can be dealt with if you cannot maintain payments to them. 

The first thing you should do is complete an income and expenditure, as above, then see what disposable income you have left. This is the amount of money you have left after you pay all your essentials.

If this is enough to make all the minimum payments to your debts, then you will probably be able to manage. However, if you cannot maintain all your minimum payments to your debts as they fall due, you may have to look at other options. Our service can provide you with these options:

Debt advice and information package 

Debt advice and information package (for use during Covid-19 emergency legislation)

Debt and the consequences

Debt and the consequences (for use during Covid-19 emergency legislation)

Business debt

If you are a sole trader, we may be able to assist you.

Get help if you are a limited companies and partnerships 

There are different options available for managing debt, which one will be suitable for you, will depends on your personal circumstances. Our service will advise you the different options and consequences of each. All debt options will impact your credit ratings of varying extent. Some examples of debt options  is listed below: 

Moratorium

A moratorium is a period of debt relief during which creditors cannot take any action against you for debts you owe them.  If you are thinking of applying for bankruptcy, a trust deed or Debt Arrangement Scheme (DAS) and require more time to think things over, but are concerned about what your creditors could do in the meantime, you could request a moratorium.
If your moratorium is granted, the Accountant in Bankruptcy will register this on the Register of Insolvencies and the DAS Register. From this date, you then have six weeks to decide if you want to proceed with an application. Due to Covid 19, the period of relief now lasting for 6 months. If you are granted a trust deed or bankruptcy then any interest, fees or charges will either be settled or written off once completed. 

Debt Arrangement Scheme (DAS)

DAS is a scheme set up by the Scottish Government to help people pay back their debts in a manageable way without the threat of court action from creditors and repay your total debt over a longer period of time. It also protects any assets you may have.
Under DAS you can set up a debt payment programme (DPP) and make one regular payment into the DPP which is then divided up and sent to your creditors.
You can apply for a DPP with any amount of debt however you have to have a reasonable amount of disposable income to enter into a DPP.

Bankruptcy

Bankruptcy is a formal process in which you are declared bankrupt by the Accountant in Bankruptcy (AiB) or a court. It is called sequestration in Scotland. You can apply for bankruptcy if you cannot pay back your debts.

There are two debts of bankruptcy: Minimal Assets Process (MAP) and Full Administration Bankruptcy (FAB). Which one you fall into will depend on the level of debt and whether you have to make a contribution towards the debt.

When you are bankrupt, your finances are controlled by a person called a trustee. It is the trustee's job to control all assets or belongings of value (if applicable) with the aim of paying as much money as possible to the people you are in debt to (your creditors). 

As well as applying for bankruptcy yourself, your creditors can apply to make you bankrupt if you owe your creditors at least £10,000.

Trust Deeds

A trust deed is a voluntary agreement with your creditors (the people you owe money to) to repay part, or all of what you owe them. A trust deed transfers your rights to the things that you own (assets), to a trustee who can sell them to pay your creditors. A trust deed will normally include a contribution from your income for a set period; this will normally include payments over 48 months, but this can vary. At the end of this time, your unsecured debts are usually written off. Your trustee must be a qualified insolvency practitioner. Insolvency practitioners are regulated by law and must be members of an approved governing body. An ordinary trust deed is not binding on creditors unless they agree to its terms and it becomes protected. Trust deeds should only be agreed if there is an intention to have the terms presented to creditors for protection.

Token offers

A token payment plan is an option that some people use when they are unable to maintain their original payments but do not want to ignore the debt when they suffer from a drastic change in circumstances. However, this should not be taken lightly, and you should only offer this to your creditors if you predict that you will be able to pick up your payments again within a year. 

Write off

In exceptional circumstances where you have no available income, savings or assets and you can show your creditors that your circumstances are unlikely to improve in future (for example, if you’re severely ill). It might be possible to ask your creditors to write off your debts.

Full and Final Settlements

If you have a lump sum that would cover part of your debts, you could ask your creditors whether they would accept a part payment and allow you to write the rest off. Alternatively, they might allow you to make monthly payments for an agreed period, after which the balance is written off.

Homeowners Support Fund

If you're at risk of having your home repossessed, the Home Owners' Support Fund may be able to help you. It is run by the Scottish Government, and it's made up of two schemes: Mortgage to Shared Equity and Mortgage to Rent. These schemes help homeowners who find it difficult to pay their mortgage or loans secured against their property, to stay in their homes.

If you would more information on the above, please contact us. There are other debt options that are available that are not listed that we can discuss further. As mentioned above, which debt option will depend on your personal and financial circumstances. 
 
Referral form 

Credit reports 

If you do not know all your debt you can request for an Experian Credit report.

You will need: name(s), date of birth, email and your addresses for the last 6 years. You do not need to create an account, but a passcode will be issued out to you within 7 days. On receipt of this passcode, you will be able to access your report. You can either print or save as a PDF to then email to your money advisor.

Bank accounts 

If you currently owe money to your current bank e.g. overdraft, credit cards/loans, we recommend to open a new ‘basic’ bank account as soon as possible. 

Before applying for a basic bank account, there are some key points about them you should be aware of:

1. You usually don't need to pass a credit check to open one
2. You'll need some form of ID to open an account
3. Basic bank accounts are mostly free of charge
4. It's not just for those with bad credit
5. Some banks don't publicise these accounts, so you may need to ask about them

While waiting for an appointment with our adviser, please start gathering:

• 3 months bank statements/post office statements
• Confirmation of any benefit you are receiving
• 3 months wage slips
• Any letters regarding your debts, we need outstanding balances and reference numbers
• Any medical evidence from health professionals (if applicable)
• Rent Agreement/Letter regarding your rent
• Mortgage Statement
• Receipts for your Gas and Electricity prepayments or Quarterly bills from Gas/Electric supplier
• Receipts for TV licence payments