Dealing with personal insolvency in Scotland

Wednesday, August 19, 2020, 6:00 AM | Leave Comment

If you are struggling with personal debt in Scotland and you wish to enter a formal procedure to tackle the stress head-on and start a debt-free future, there are several debt solutions which can help restructure payments and keep creditor pressure at bay.

The route you take will depend on the value of outstanding debts, affordability and personal circumstances.

The type of debts, such as consumer debts will determine eligibility, including your income level and any financial commitments.

There are a variety of common personal debts which are pushing individuals into financial distress, including the notorious store card if spent unwisely, totalling up personal credit cards and taking out multiple payday loans.

We take you through the most common type of personal debts and how to access the best advice in Scotland.

  • What are the most common types of personal debts?

    It can be easy for debts to spiral out of control by missing one monthly instalment as interest will begin building up and before you know it, the debt owed will become unmanageable.

    Common types of debts incurred include:

    • Overdraft

    • Store and credit card

    • Council tax

    • Utility bills

    • Mortgage and rent

    • Personal tax

    Debts which are less common include:

    • Child maintenance

    • Gambling and addictions

    We take you through the options available if you are no longer able to meet payment deadlines and fulfil basic expenses, such as utility bills and child maintenance.

  • Sequestration

    Sequestration is the Scottish equivalent of bankruptcy which can help you write off a portion of unsecured debts. This form of personal insolvency can be entered into voluntarily and is typically the last route as it can have a long-lasting effect on your credit record. You can be forced into sequestration by a creditor; however, they should be owed £3,000 or more to sequestrate a debtor.

    If you reside in Scotland, your debts outweigh £1,500 and you have not been sequestrated in the past 5 years, you can enter sequestration on your own accord and without approval from the creditor(s). A Trustee will be appointed which can also be your insolvency practitioner who will be responsible for realising any assets of value to repay creditors and advise you on your future financial prospects.

  • Trust Deed

    A trust deed is the formation of a debt repayment plan which typically lasts 4 years with agreement from creditors to repay unsecured debts over a strict period. This will be administered by a Trustee which will be a licensed insolvency practitioner. A Trust Deed will help you restructure debts into affordable monthly instalments, eventually releasing you from the remainder of your debts if any. During your Trust Deed, you will be protected from any action from creditors and to qualify, your debts should be £5,000 or more.

  • Debt Arrangement Scheme

    A Debt Arrangement Scheme can break your outstanding debts into affordable monthly instalments if you have debts of £5,000 or over. The government-backed scheme will arrange payments based on your disposable income, freezing interest, penalties and fees. This measure gives you the freedom to manage your debt problems without the need for declaring insolvency.

    If you require immediate action due to severe debt built up or as a result of the coronavirus pandemic, seek professional advice from a licensed insolvency practitioner. Once facing the prospect of dealing with your debts face-front, the process will become easier and we can agree with creditors if that’s the route you wish to take.

Author bio:

Sharon McDougall is a personal finance and insolvency expert from Scotland Debt Solutions. She is a DAS-approved Money Adviser with vast experience in assisting individuals with debt problems to manage their money and advising on personal debt solutions in Scotland, such as Sequestration and Trust Deeds.

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