The Scottish Debt Arrangement Scheme explained
If you live in Scotland and are struggling with your finances, then the debt arrangement scheme may offer a potential solution.
The Scottish debt arrangement scheme has been created by the Scottish government to help people struggling financially to repay their debts in a manageable way.
The big attraction is that they will stop being hassled by their creditors, that’s the people they owe money to.
Under a debt arrangement scheme, you simply make one payment regularly, and it’s this that is divided up and sent to creditors.
The other big attraction for the scheme is that someone can apply to take part with any amount of debt.
Scheme is similar to a Scottish trust deed
While the scheme is similar to a Scottish trust deed, there needs to be a minimum of £5,000 of debt before the deed can be applied for.
Also, you can apply for the debt arrangement scheme with a partner or spouse if you are both liable for at least one joint debt.
As part of the scheme, an applicant will get advice from a money adviser and they will need to make the application on your behalf.
It’s here that the helpful team of debt advisers at Scotland’s Trust Deed really come into their own and they offer impartial help and advice; this means that you don’t have to act upon their recommendations.
Debt arrangement scheme
However, for those interested in the debt arrangement scheme then there are some criteria that may help, one of which is that you have enough money left after paying your important bills to repay debts over a reasonable period of time.
Also, if you are a homeowner and don’t want to sell your home, despite having lots of equity, then you may not have to do this. Under a protected trust deed, and also for bankruptcy, you may have to sell your property to release the equity to repay creditors.
Another issue is that someone in Scotland could be affected by using another debt solution option, for example, bankruptcy or a protected trust deed as this may affect their employment.
One of the problems for someone working in the financial sector, for example, is that they could lose their job if they are declared bankrupt.
Along with not having creditors pursue you for repayment, the debt arrangement scheme will also stop debt charges and interest being added to the debt.
Sign up to a debt payment programme
It’s also important that your credit to understand that your credit rating will be affected when you sign up to a debt payment programme under the scheme, so you may find it more difficult to access a loan or mortgage in future.
Also, your access to credit will be restricted and you may be allowed to borrow a limited amount under the scheme, if at all.
As mentioned earlier, one of the big attractions for the scheme is that someone struggling financially will get a period of time to repay what they owe. While this is defined as a reasonable time, the actual length of time is not defined.
That’s because the Accountant in Bankruptcy will decide whether the length of time being proposed for repayment is ‘reasonable’.
Essentially, if it would take more than 10 years to repay your creditors, then it’s unlikely that the scheme will be approved.
The Scottish debt arrangement scheme will help many Scots struggling financially
There is no doubt that the Scottish debt arrangement scheme will help many Scots struggling financially, but there’s also the option of a Scottish trust deed and also bankruptcy, or sequestration, as viable alternatives to help resolve their financial situation.
Personal insolvencies rise in Scotland
The number of Scots who are struggling with personal insolvencies has risen between April and June, new figures reveal.
In the first quarter of this financial year, the number of protected trust deeds and bankruptcies being reported by the Accountant in Bankruptcy was 3,208.
That’s a rise of 11.8% on the same quarter in 2017, and it’s a shocking 26.6% higher than it was in the first quarter of this year.
A protected trust deed is an arrangement that is legally binding and enables someone in debt to make reduced payments to their creditors over four years.
The numbers have risen year-on-year to reach 1,972, a rise of 27.5%.
Bankruptcies in Scotland
However, bankruptcies in Scotland have fallen to 1,238, a drop of 6.5%, compared with the first quarter of last year, though there is a slight rise from the first quarter of this year.
The number of people accessing the debt arrangement scheme, which is run by the Scottish government, has also risen year-on-year by 8.5%. There were 648 debt arrangement scheme applications approved.
Also, around £9.5 million was paid through the scheme in this period, a slight rise on last year’s figure.
A spokesman for the AIB said that the number of people entering insolvency is much lower than it was 10 years ago, though there is a clear upward trend from the beginning of 2015 to today’s figures.
‘Ensure debt solutions are relevant to today’s society’
He added: “Consumer borrowing is now surpassing the level of that seen before the 2008 crash and there is an ambitious programme of reform to ensure debt solutions are relevant to today’s society.”
A spokeswoman for R3, an insolvency and restructuring trade body, said that higher rates for living and minimum wages which were brought in last April, will have helped many to pay for the higher costs of fuel and food.
However, she says that these increases may not be enough for many people with wage growth now being outstripped by inflation.
With the growing numbers of people living in Scotland who are struggling financially, it’s important for those that are that they seek helpful and impartial advice.
Friendly team of debt advisers at Scotland’s Trust Deed
One such outlet is to contact the friendly team of debt advisers at Scotland’s Trust Deed who can offer guidance about the debt arrangement scheme and also a protected trust deed.
In addition, the team can also discuss the merits of bankruptcy, which is better known as sequestration in Scotland, because careful thought needs to be given to bankruptcy before it is undertaken.
While the Scottish trust deed and debt arrangement schemes are similar, there are big differences with the former seeing someone in debt repay what they can afford over a set period of time with the amount that remains at the end of this period being written off as unaffordable.
That’s not quite the same with the Scottish debt arrangement scheme which sees someone paying what they can afford until all of the debt has been paid back.
Information about the debt arrangement scheme or a Scottish trust deed
For more help and information about the debt arrangement scheme or a Scottish trust deed, it’s time to contact the team at Scotland’s Trust Deed.
For Scots worried about debt – here are your options
If you live in Scotland and are worried about your level of debt then you need to be aware of what your potential solutions might be.
Indeed, it will help to have an impartial and confidential discussion about your financial situation with experienced and friendly debt advisers.
You can do this with the friendly team available at Scotland’s Trust Deed and there’s also an online debt test to see what potential solutions may be open to you.
There are a number of issues that someone in debt may already struggle with such as being behind with paying their electricity and gas bills, or they are facing disconnection of the utilities, or they cannot afford to repay the minimum amount on their credit cards.
They may also be a need to rely on payday loans or they pay their bills late because they don’t have the money available.
Being behind on their mortgage or rent
There’s also the big worry about being behind on their mortgage or rent and they fear they are about to be evicted.
All of these issues will create stress and worry but it is possible to take action to resolve these problems and get out of debt.
The main point for those who are living in Scotland is that there are several ways to overcome indebtedness but you need to choose the solution that’s right for you.
This will mean speaking with debt advisers who will understand your circumstances and how much money you have available to resolve your debts.
There’s no point ignoring debts or creditors chasing you for payment because it’s a problem that can easily spiral out of control.
It may be that the situation is so bad that the potential of sequestration, or bankruptcy, will appeal because this may resolve your debt problems. However, you’ll need to take advice and then consider carefully before opting for sequestration.
Scottish government run debt arrangement scheme
Alternatively, there’s the Scottish government run debt arrangement scheme which will enable someone living in Scotland to repay what they owe at an amount they can afford over a longer period of time.
There’s a legal protection when you undertake a debt arrangement scheme so your creditors will no longer be able to hassle you.
The big attraction is that all that you owe will be repaid whereas with a Scottish trust deed there may be an amount of debt when the agreed term comes to an end and this amount will be written off.
Not everyone is eligible to sign up for a trust deed because of the criteria involved but for many people struggling financially in Scotland, the debt arrangement scheme has a lot of attractions.
Friendly team of debt advisers
If you would like more help and impartial advice about what debt solutions may be available to you and your current circumstances, then it’s time to contact the friendly team of debt advisers at Scotland’s Trust Deed.
Scots are struggling to deal with unmanageable debt
While London is the UK’s debt hotspot, for people struggling financially in Scotland they aren’t far behind.
According to the Financial Conduct Authority (FCA) more Londoners are having to deal with their unmanageable debt than anywhere else in the UK.
The average proportion of over-indebted people living in an area is 15% but in London there are 17% of adults who are struggling with their debts.
The FCA says that ‘over-indebted’ describes those who are struggling to keep up with credit commitments and their bills.
The average amount owed in unsecured debt across the UK is £3,200 – though the average debt holder owes £9,570.
Areas in Scotland where people in debt
However, there are some areas in Scotland where people in debt owe £10,000 more than that figure and these areas are closely followed by parts of outer London.
There’s also a greater reliance on people who have retired for their state pension with 30% of retirees not having a private pension.
Also, the survey highlights that 1.3 million adults don’t have access to a bank account.
There is no doubt the growing numbers of Scots in debt need to tackle their financial problems with independent and impartial advice.
This can be accessed by contacting the friendly team at Scotland’s Trust Deed.
Pros and cons of a debt arrangement scheme
In addition to discussing the pros and cons of a debt arrangement scheme, the debt adviser can also discuss what a Scottish trust deed can do.
Both of these arrangements are contractual and offer a level of protection for the debtor against the creditors – that’s the people who you owe money to.
In addition, both schemes offer the ability to repay debt at a much lower rate – something that’s more affordable – and over a longer period of time.
The difference between a Scottish trust deed and the debt arrangement scheme, which is run by the Scottish government, is that the latter sees all of the debt being repaid.
With the trust deed, there will be an amount of debt remaining when the agreed period for the arrangement comes to an end and this is then written off as being unaffordable.
Help for Scots in debt
That’s a big help for many Scots in debt and the advisers at Scotland’s Trust Deed can help with organising one or talking through what the potential solutions for resolving debts may be.
Scots in debt warned that credit card costs will rise
If you live in Scotland and are struggling with debts then news that the cost of credit card debt is about to rise may not be welcome.
According to the website Moneyfacts, the cash and purchase rates for credit cards rose in the second quarter of this year.
Also, cash withdrawal fees have also been increasing so those in debt may struggle to get into the black.
The news comes after one financial charity said that there’s been an increase in credit card borrowing in the first three months of this year compared to last year.
Moneyfacts says the fees for an average purchase per year were 21.256% in January but that figure has now increased to 21.429%.
This means the average purchase APR rose from 22.8% to 23.1% and withdrawing cash on a credit card has now risen to 27% PA.
Outstanding debt on their credit card
While the purchase fees appear to be a small increase, for someone with a large outstanding debt on their credit card, this could be serious.
On top of this, there is the likelihood that interest rates could rise in the coming months so that debt may increase even more.
One recommendation from debt advisers is to switch a credit card balance to one that has a 0% interest for an interim introductory period.
These interest-free deals may only be temporary but they do help buy someone who is struggling with debt time to repay what they owe.
If you are living in Scotland and struggling with your credit card debt, then it helps to speak with an impartial debt adviser.
Friendly team available at Scotland’s Trust Deed
There is a friendly team available at Scotland’s Trust Deed who can help with advice that will help and you don’t have to do follow the guidance.
The advisers can discuss potential solutions include including a Scottish trust deed and the debt arrangement scheme. This is run by the Scottish government and works along similar lines to a trust deed.
The big difference between the two is that under a trust deed, someone in debt living in Scotland will repay what they can afford over a set period and the amount that remains at the end of this is then written off.
For those who decide the debt arrangement scheme is for them, then there is no amount remaining at the end and all of the debt is repaid at an affordable rate. This is a big help for many people and it’s proved to be popular.
There are other potential debt solutions for people living in Scotland and the Scotland’s Trust Deed team can discuss these as well.
It may help that there is an online debt checklist available on the website to see quickly what the potential solutions are that may be available to you and your situation.
How Scots can deal with debt
For more help and advice about how Scots can deal with debt, then the Scotland’s Trust Deed team are available every day.