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.