Dealing with debt in Scotland
There are different solutions available to you if you reside in Scotland and we have provided a brief overview below. Curtis Faraday specialise in the administration of Individual Voluntary arrangements and so not always administer Scottish products. However, we work with partners that can assist you.
What is a Trust Deed?
A Trust Deed is a legally binding arrangement between you and your creditors which allows you to make affordable repayments toward your debts for a set period of time.
A Trust Deed Can be an option if:
- You have more than £5000 worth of debt
- You’re struggling to make minimum payments towards your debt
- You are a resident of Scotland
- Can afford a minimum of £100 per month
Protected vs Unprotected
A Trust Deed is a powerful tool for debtors, offering protection from creditors – if the majority of them agree to its terms. If that does not happen however, then it becomes ‘unprotected’, and creditors could take more direct action against you with regards to any money owed by you.
What are the advantages of a Trust Deed?
- Typically only lasts for four years
- You do not need to attend court to apply
- One affordable monthly repayment
- Creditors are not able to pursue the debts
What are the disadvantages of a Trust Deed?
- Your credit rating will be affected for 6 years
- There are fees payable for the administration of a Trust Deed
- Your details are recorded on the insolvency register
- If you have asset such as a vehicle worth more than £3000, they could be sold to repay your creditors
Debt Arrangement Scheme (DAS)
A DAS allows you to repay your debts by making affordable monthly repayments. A DAS can protect you from creditors taking legal action in the future in what is known as a Debt Payment Programme (DPP). Your creditors will have 21 days to object to the proposed DAS and if no objections are raised the DPP will go ahead.
Advantages of a DAS
- Your creditors can no longer pursue the debts or add further interest and charges.
- Your assets are usually not at risk of being sold.
- In some circumstances, if a creditor rejects the administrator may be able to force them to agree.
- You will only make one affordable monthly repayment
Disadvantages of a DAS
- Your credit rating will be affected which may impact your ability to obtain future credit.
- Your creditors could reject the arrangement.
- Reducing your payments may mean it takes longer to become debt free.
- Failure to comply with the DAS means it could be revoked.
What is Sequestration?
Sequestration is the Scottish equivalent to Bankruptcy. You must meet certain criteria to enter into sequestrations and these are:
- Your total debts must be at least £3,000.
- You must not have been made bankrupt under other rules in the past five years.
- You must either be apparently insolvent or have a certificate for sequestration.
Advantages of Sequestration
- You are legally protected meaning creditors can no longer pursue you.
- Interest and Charges are frozen.
- Debts are typically written off after 12-months.
Disadvantages of Sequestration
- Assets of value may be repossessed (including your home – if homeowner).
- There is an application fee of £200.
- Your details will be listed on the insolvency register which is a public record.
- Will have a negative impact on your credit profile for 6 years.
Minimal Asset Process (MAP)
MAP is the name given to a special type of bankruptcy in Scotland. To qualify for this option, you need to have a low level of debt and very few assets.
In order to go bankrupt using the MAP process, you have to meet the following criteria.
- Your total debts are no more than £25,000.
- Your total assets are worth no more than £2,000.
- You don’t have any individual assets that are worth more than £1,000. (A car that you reasonably need will not be counted as long as it is not worth more than £3,000).
- You don’t own any land or buildings.
- You have a valid certificate for sequestration. This is a formal document confirming that you cannot pay your debts as they fall due.
- A money adviser must assess your income and expenditure using the Common Financial Tool. This must show that you have no money available after your essential bills to pay to your creditors. If your income is made up of only benefits, and you have received them for at least six months before your application, you automatically meet this condition.
- You have not been made bankrupt under the minimal asset process rules in the last ten years.
- You have not been made bankrupt under other rules in the past five years.
Advantages of MAP
- Creditors cannot contact you during the 6-months process.
- You do not need to appear in court.
- You will not need to make any monthly payments.
- Debts may be written off after the 6-month period and creditors are no longer able to pursue the debts.
Disadvantages of MAP
- Your credit rating will be negatively affected.
- You must meet the qualifying criteria above to enter this solution.
- You will be subject to some restrictions during the first 12 months after the MAP; For example, you cannot apply for credit above £2000 without telling the lender you’re bankrupt.
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