One of the most common questions for people dealing with debt is whether they can get their debts written off, clearing them of their financial obligations and giving them a fresh start with their finances.
However, while there are some debt solutions that can help you break free from your unaffordable debt, it isn’t as straightforward as simply applying to get it written off, and the rules differ depending on where you live in the UK.
What does debt write-off mean?
Debt write-off happens when your creditor (the individual or business you owe) agrees to either partially or fully clear your debts, meaning you no longer owe money and they will stop pursuing you for it.
However, there is no official guidance for the debt write-off process, and creditors will review your financial circumstances before agreeing to write off your debts.
Because they are not obligated to do so, most creditors will only consider writing off debt in exceptional circumstances or if they are confident they won’t receive the money owed.
While you will no longer be responsible for the repayment of a debt once it has been written off, it will still be listed on your credit file as paid or partially paid.
This can show a commitment to addressing your debts but may mean you struggle to get approved for credit for several years.
How can I apply to have my debts written off?
The first step towards getting your debts written off is writing to your creditors outlining your financial situation and why you can’t afford to pay your debts.
This letter should include some personal details as well as a carefully created budget showing that you are experiencing financial difficulty.
Reaching out to your creditors directly can be daunting, but being open and honest about your financial situation can make it feel like a weight has been lifted and give you the best chance of getting your debts written off.
Even if your creditors refuse a full debt write-off, they may still agree to write off a portion of your outstanding balance, making future monthly payments much more manageable and affordable.
How we helped Yvonne
“It’s scary how quickly debts can build up. I never thought this would happen to my family.”
No Yvonne has a plan in place she can look forward to a future without money worries.
Monthly repayments before and after entering a Trust Deed
Repayments reduced by 70%
Monthly payments are based on individual financial circumstances
How we helped Yvonne
Yvonne: “It’s scary how quickly debts can build up. I never thought this would happen to my family.”
Customer monthly repayments before and after entering a Trust Deed
Repayments reduced by 70%
What is a full and final settlement offer?
In Scotland, you may be able to ask your creditors for a full and final settlement offer to write off your debts.
This is where you pay a lump sum instead of the full balance you owe on the debt in exchange for having the rest of your outstanding debt written off.
This can be a suitable option if you have come into some money, have savings, or a friend or relative has agreed to give you money and you’d like to put it towards repaying your debts.
While your creditor isn’t obliged to accept this offer, they may be happy to receive a portion of the money they are owed if you can prove your financial situation is unlikely to improve in the future. Remind them that the money won’t be available forever and that payment won’t be made until the offer has been accepted.
When do creditors consider a debt write-off?
While rare, your creditors may consider writing off your debts if:
- You are severely ill
- You are retired
- You are in long-term unemployment
- You have no income, savings or assets
- Your debt level is small
A massive thank you
“I’d like to say a massive thank you to Carrington Dean for helping me. It feels like I have control of my life again.”
What debt solutions can write off my debts in Scotland?
There are a number of debt solutions available in Scotland that may lead to a full or partial debt write-off, including:
Trust Deed
A Trust Deed is a formal debt solution that consolidates your unaffordable debt into a single monthly payment while freezing all interest and charges.
A Trust Deed will become a Protected Trust Deed if the majority of your creditors are happy with the proposed terms, preventing them from taking any further action against you.
Once you have submitted the final payment to your Insolvency Practitioner (IP), you will be discharged and your creditors will be required to write off any remaining debt.
Trust Deeds are designed to help people with debt levels of £5,000 or more and typically last a total of four years, although this can be longer depending on your personal circumstances and debt level.
Debt Arrangement Scheme
A Debt Arrangement Scheme (DAS) is a government-backed debt solution that allows debtors to apply for a Debt Payment Programme (DPP) to repay their debts at an affordable rate.
Debt Arrangement Schemes require you to repay the total balance on your outstanding debts but will lower your monthly repayments to an amount you can reasonably afford and stop your creditors from taking legal action against you.
Upon completion of your DAS, all interest, fees, charges, and penalties will be written off.
Sequestration
Sequestration is the Scottish equivalence of bankruptcy in Scotland and can be a way to write off your unsecured debts, from Council Tax arrears to overdrafts.
Like bankruptcy, any non-essential assets you own will be passed into the hands of a Trustee who may sell them to raise money to pay off your debts.
To be eligible, you must have a debt level of £3,000 or more and have received debt advice from an approved money advisor.
Once your sequestration term comes to an end, your remaining debts will be written off and you will be free to get on with your life without the burden of debt hanging over your head.
Will writing off my debts affect my credit rating?
Any missed payments that lead to you accumulating debt will appear on your credit report and affect your credit rating for up to six years, even if the full balance is repaid in this time.
The severity of the damage will depend on how you write off your debts with some debt solutions having a more serious and long lasting impact than others. For example, while a typical sequestration only lasts 12 months, your credit rating will be impacted for six years.
However, there are steps you can take to gradually improve your credit score after writing off your debts. Checking your credit report from each of the main credit reference agencies can help you keep an eye on your credit score as you take steps to improve it.
