Personal debt affects millions of people across Britain and at present there is an estimated 1,000,000 people struggling to manage their credit commitments. Over the next 5 years these people will try to find ways to pay their loans, credit cards and other unsecured debt. For a large percentage it will be an arduous task which will need professional help.
It’s important that when people are in debt they seek help as soon as they realise they can no longer manage their finances. This could mean the problem is resolved before it becomes too severe and the only options are a Trust Deed, IVA or Bankruptcy. There are a number of UK debt solutions which help thousands of people each year. In this article we have focussed on the Scottish debt solutions. The legal system in Scotland is different to England, Ireland and Wales which is why the debt solutions are not the same.
Recent statistics released have shown that the worst cities in the UK for personal finance were Glenrothes, Kirkcaldy & Livingston all of which are based in Scotland. It is more important than ever for the people of Scotland to know what help there is available for their debt problem. There is always a solution to debt, and in some cases there maybe two or three options available.
Scottish Debt Solutions
Debt Management Plan – The Debt Management Plan is an informal plan where the person in debt would repay all of the money they borrowed over a longer period than originally agreed. It’s predicted that across the UK 500,000 people are in a debt management plan right now, with 300,000 in a for profit debt management plan. The Debt Management Plan can be stopped by either party at any time.
Protected Trust Deed – This is a formal agreement which usually lasts for 36 months. The person in debt will repay a percentage of the money they borrowed over the term of the Protected Trust Deed. So long as the creditors agree to the solution and the person in debt continues to make their monthly contributions then the rest of their debt will be written off. Should the person in debt fail to complete the Protected Trust Deed they will most likely face Bankruptcy.
The criteria to enter a Protected Trust Deed is:-
– Unsecured Debt of at least £10,000,
– Disposable income each month of £100 and a return to creditors of at least 10%.
Each year around 9,000 people enter a Protected Trust Deed. The Protected Trust Deed is similar to the English, Welsh and Northern Irish Individual Voluntary Arrangement (IVA).
Sequestration – This is the Scottish equivalent to Bankruptcy. The Sequestration will last for one year, afterwhich the person in debt will be discharged. If the debtor is able to make a contribution towards their debt, then this will happen for 3 years. At the end of the solution any debt will be cleared, however a default will last on the person in debts credit file for 6 years.
(LILA) Low Income Low Asset – This is a new route into Sequestration (Bankruptcy). This solution was was launched back in April 2008 for people who have a low income and low / no assets. The solution enables people earning minimum wage, no asset worth over £1,000 and unable to meet any other debt solution the option to enter the LILA. You cannot enter a LILA if you own a house. The equivalent scheme for England, Wales and Northern Ireland is called Debt Relief Order (DRO).
Debt Support Trust is a not for profit debt advice charity that provides telephone and internet based debt advice. The charity values include