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:
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 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.
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.
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.
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.
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.
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:
- You usually don't need to pass a credit check to open one
- You'll need some form of ID to open an account
- Basic bank accounts are mostly free of charge
- It's not just for those with bad credit
- 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