Your options for dealing with debt in Scotland
Dealing with debt is one of the most stressful parts of life. The overwhelmed, desperate feeling experienced can cloud your judgement and decisions. At Scotland’s Trust Deed, we have written this short guide on your debt solution options to help you feel empowered to make informed and calm decisions.
How much do you owe and to who?
There’s no denying that this will be the most painful and daunting part of the process. Many people in debt avoid the issue for a long time and don’t have a clear idea of how much they owe.
Look at all the letters, statements and demands that have come through your door and create an accurate record of the amount owed and who it needs to be paid back to. Knowledge and acceptance is a powerful tool at this point.
The most important part of this process is working out how much money you have that could be used to pay off your debts.
- Take an honest and rigorous look at how much money you have coming into your household and how much you need to pay for your home, food, utilities, transport and other essentials.
- Look at where savings can be made in your day to day spending.
Which debt to pay first
If you do find yourself with money left over to use for your debt then Scotland’s Trust Deed urge you choose which creditor to pay first very carefully. Money owed which will lead to eviction, losing your home or court fines is the money you should pay back first.
What help do I need?
It’s possible that you will be able to deal with some creditors yourself. However, specialist help from Scotland’s Trust Deed may be required where negotiation is needed. Get in touch with us for impartial, friendly advice from our experienced team.
Research your options
- Apply for a Trust Deed with a company such as Scotland’s Trust Deed.
If your home is in Scotland then you can apply for a Trust Deed. This is an arrangement where unaffordable debt is written off and a scheme of payments is created. Negotiation with your creditors will be needed and it is not guaranteed you will be accepted.
- You could put all of your separate debts into one single loan with a loan consolidation.
Obviously, this option very much depends on your current credit rating and if you can afford the payments and interest. It’s a legally binding agreement so consider it carefully.
- Consider a Debt Arrangement Scheme (DAS)
A DAS will give you breathing space and time to pay your debts with smaller payments over a longer time period. It is a legally binding agreement and the payments must be made on time to avoid further issues.
- Bankruptcy (sequestration)
This is usually the last option. Your assets will be shared amongst your creditors so home owners may find their property at risk. Once out of the bankruptcy period you will be free of debt and able to start again.
For more help and advice about dealing with debt and for impartial advice, then contact the friendly team at Scotland’s Trust Deed today.
Growing numbers of Scots face financial hardship
There are growing numbers of people in Scotland facing financial hardship, according to official statistics.
Accountant in Bankruptcy, the Scottish insolvency service, says that in the third quarter of last year, the number of personal insolvencies grew by 18% – a year-on-year rise to 3,198. This is the combined figure of bankruptcies and those who undertook a protected trust deed.
Bankruptcy, or sequestration, is a declaration that someone cannot repay their debts while a trust deed is a form of insolvency that sees the debtor’s estate being transferred to a trustee to benefit creditors.
There has also been a rise in the number of Scots applying for a debt management programme which is approved under the debt arrangement scheme.
In the third quarter, 668 such debt payment programmes were approved.
‘Personal insolvencies have been rising every year in Scotland ‘
The chairman of R3, an insolvency firm, Tim Cooper said: “Personal insolvencies have been rising every year in Scotland since 2015 and 2018 continued the trend.
“10 years after the global financial crisis, many have reached their borrowing capacity limit and are tired of being in debt.”
He added: “While a rise in personal insolvencies is troubling, there’s been a shift in the culture on debt.
“People are willing to talk about personal financial problems now and seek advice and not bottle things up until it escalates.”
Mr Cooper also said: “The sooner someone who is in financial distress looks for help, then more can be done to help resolve the situation.”
Struggling with debt
There’s no doubt that Mr Cooper is right that someone who lives in Scotland and is struggling with debt should speak to someone who may be able to help.
At Scotland’s Trust Deed there’s a team of experienced debt advisers who can offer guidance and help about how to overcome a difficult financial situation.
Among the potential solutions is for a protected Scottish trust deed along with bankruptcy and the debt arrangement scheme.
If you don’t want to speak with a team member, then it’s possible to use the online debt test to see what potential solutions are available in Scotland.
A Scottish trust deed
As for a Scottish trust deed, you’ll need to have unsecured debts of more than £5,000 and then agree to a legally binding contract between you and your lenders to repay an agreed amount every month.
This amount will be repaid over a period of time and the amount of debt that remains when this agreement ends will then be written off.
A Scottish trust deed is popular for this reason but not everyone will be able to qualify and they can instead undertake a debt arrangement scheme, which is run by the Scottish government along with other debt solutions as well.
For more help and advice about bankruptcy or a trust deed, or indeed the debt arrangement scheme, then it’s time to contact the experts at Scotland’s Trust Deed.
The Debt Arrangement Scheme: Pros and cons
If you live in Scotland and are struggling with debt, there are a number of potential solutions available including the opportunity of the debt arrangement scheme.
This is run by the Scottish government and gives someone living in Scotland the chance to repay their debt at a lower rate for a longer period of time.
The main benefit is that all of a person’s debt will be paid over the agreed time.
However, there are pros and cons for Scotland’s debt arrangement scheme and here will look more closely at what they are.
Benefit of the debt arrangement scheme
The main benefit of the debt arrangement scheme has already been mentioned – the payments to pay down debt are more affordable.
These payments are calculated after your essential bills have been taken into account, such as paying your rent or mortgage and utility bills.
This leaves an amount of money for you to budget with and help prevent your debts from getting worse.
Another positive for the debt arrangement scheme is that if your circumstances change during the course of the agreement, it’s a flexible debt tool so during a drop in income, for example, then the amount to repay could be adjusted to help prevent the arrangement from failing.
Another positive is that the interest and charges on debts are frozen to help prevent you from entering a debt spiral.
This is when you have several debts and then struggle to repay them and the interest and charges increase the debt amount quickly.
Debt arrangement scheme delivers protection from creditors
The debt arrangement scheme also delivers protection from creditors, so they can no longer hassle you when chasing their money. Indeed, you should have no contact with creditors under the arrangement and they will have to contact you through an insolvency practitioner, who oversees the scheme.
Also, a debt arrangement scheme will help you avoid bankruptcy, or sequestration as it may be known.
While the scheme is a popular way to pay debt down there are some downsides to it, which include having to repay all of your debts.
By this, we mean that no part of the debt will be written off, which isn’t quite the situation with a Scottish trust deed.
Under a protected trust deed someone who lives in Scotland can repay what they owe and at the end of the agreed term, the amount of debt that remains will be written off.
Since there is no amount to write off, this means that a debt arrangement scheme can run for several years for the debt repayment plan to be completed.
A lot depends on your own circumstances, such as your monthly income and how much money you owe.
Negative effect on your credit rating
There will also be a negative effect on your credit rating and this will remain on your credit file for six years, so you may find it difficult accessing credit or loans over this period of time.
Also, you’ll need to have more than one debt to be eligible for the debt arrangement scheme, so if you have a large debt with one creditor, you will be ineligible to apply but there are other alternative options available.
This is where the experience of the advisers at Scotland’s Trust Deed will be able to help.
They can offer impartial help and advice that you don’t have to follow but it will highlight what potential debt solutions are available to those who are living in Scotland.
A Scottish trust deed
They can also tell you more about a Scottish trust deed, the debt arrangement scheme and also sequestration, and they are available to speak with every day on 0141 297 1178.
The options for Scots to clear their debts
If you are struggling to pay your bills every day, then there are options available for Scots to clear their debts effectively.
In addition to these bills, you may be struggling with other financial commitments, including loan repayments.
However, while this article will outline some of the potential options available, it’s important that you get independent and free expert advice and there are debt advisers available at Scotland’s Trust Deed for this purpose.
The aim of this advice is to help you decide which of the options is going to be the most suitable to clear or manage your debts.
For anyone who is struggling financially, it’s best to speak with someone as soon as possible rather than ignore the problem as it will get worse.
Advice for clearing debts in Scotland
The most important advice for clearing debts in Scotland is that you’ll need a solution that suits your personal circumstances so what might be a great scheme may be unsuitable.
First up, let’s have a look at the debt arrangement scheme. This is a debt management solution that enables someone who is living in Scotland to repay their debts over a longer period of time at a rate they can afford.
The big attraction when undertaking the debt arrangement scheme is that you are given protection from creditors who are trying to recover their money.
There are criteria for the debt arrangement scheme, including having at least one debt and you must be based or live in Scotland.
Also, you’ll need some money left over after paying essential bills, such as the rent and electricity and food.
A debt management plan
There’s also the opportunity of a debt management plan which can be arranged between you and your creditors.
With this arrangement, you will repay an agreed amount over a set period of time and a debt management company can arrange this on your behalf and then collect the money from you to share out between creditors.
There’s also the potential of a trust deed in Scotland, which is a voluntary agreement between your creditors and yourself to pay back most of what you owe.
The usual repayment period is three years and the amount of debt that remains when this is over is then written off.
If this sounds like a good idea, then you can apply for a trust deed if you have unsecured debts, such as loans, credit cards and overdrafts.
Again, you’ll need enough money left over after paying your essential bills to help pay down the debt.
In Scotland, there’s also the potential route of sequestration, which is better known as bankruptcy.
To apply for bankruptcy, you’ll need debts of at least £1,500 and have not been sequestration at any point in the last five years. You must also live in Scotland.
Another potential debt solution for Scots in debt include offering a full and final settlement for your debt to a creditor, so they may accept a part payment and then write off the remaining amount.
There’s also the potential of asking a creditor to write off your debt if you have no available income or any assets or savings and your circumstances will not improve in the future.
As mentioned previously, it’s important that you take impartial advice as soon as possible and the experienced debt advisers at Scotland’s Trust Deed are available to discuss the potential of any of the solutions mentioned here.
Scots offered money saving challenge to help debt situation
Among the New Year’s resolutions that Scots in debt may have considered is to save more money this year to help them get out of debt.
To help, various bloggers and financial advisors have been offering simple ways to save and for anybody interested in how they can save up to £1,500 in 2019 then using the simple 365-day challenge may prove appealing.
There are other saving campaigns being launched as well which we will come to.
However, the 365-day challenge sees someone save £1 every Sunday, £2 on Monday and on Wednesday they save £3 and so on until they reach the next Sunday and start with £1 again.
Since Christmas and New Year can be a financial struggle for many people in Scotland, this idea of using a simple trick to boost savings by £1,500 is certainly one to consider.
One of the attractions is that savers don’t have to cut back too much on their current levels of spending but not everybody will be able to save so much money every week.
People will fall behind with their finances
Indeed, a major organisation revealed last year that around 8 million British people will fall behind with their finances this January because of what they spend over Christmas.
In addition, one switching comparison site has revealed that the average British shopper racked up £452 on average on their credit card to help cover the cost of the festivities.
The savings plan mentioned above will see £28 being saved every week and with the £7 being put aside on Saturday, those behind the idea say this equates to two coffees.
Alongside this, there are other popular alternatives, including the 52-week challenge.
This works on similar lines, with savers putting aside £1 in their first week, £2 in the second and then carry on saving increasing amounts until the end of the year.
The downside to this is that they’ll be putting away the larger sums near to Christmas, which can be an expensive time for many of us.
The ‘one penny challenge’
There’s also the ‘one penny challenge’ which could see someone save £668 by the end of the year.
To do this, you start with 1p per day, and gradually increase the amount until the end of the year.
That might be more achievable for many people and still deliver a tidy cash sum with little effort.
The best way for doing this may be to put the money in a jar – and not to dip into it!
If you are struggling financially after the festivities and would like advice on how to deal with debts, then the team at Scotland’s Trust Deed is available.
The discussion will be confidential and any advice will be impartial, so you don’t have to follow it; you will learn what is available to deal with your current situation.
Considering a Scottish trust deed
This may include considering a Scottish trust deed, a debt arrangement scheme, which is run by the Scottish government and also bankruptcy. You will need to consider each of these potential debt solution routes carefully but the debt advisers can explain more.
For more help and advice about how to resolve your debt situation, then it’s time to contact the team at Scotland’s Trust Deed to see what can be done.