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Meet your insolvency match
With Wimbledon in full swing we’re asking have you met your insolvency match?
There’s no denying that dealing with debt can be daunting and the prospect of opening up about your financial worries often stressful. However, with a wealth of solutions available accessing support that suits your circumstances have never been better.
All eyes might have been on centre court today as Serena Williams and Andy Murray took on Raquel Atawo and Fabrice Martin in the second round of the mixed but for those facing the challenge of living with debt, we’re shining a light on the debt help solutions that can make a real difference to day-to-day life.
Only open to Scottish residents, a Trust Deed is an agreement which freezes interest, allows you to make monthly repayments towards your unsecured debts and write off any remaining payments at the end.
Typically lasting between four and five years a Trust Deed is one of the most popular debt help solutions for those living in Scotland unable to repay unsecured debts of £5,000 or more.
Unsecured debts such as credit cards, personal loans, Council Tax arrears, and outstanding parking charges are just a few of the debts that can be relived in this arrangement.
Entering a Trust Deed offers protection from legal action from the people you owe money to and can allow you to retain assets and, if a home owner, your property subject to their value and your circumstance.
All payments are made based on your affordability and takes payments for general living expenses and household bills into account.
Debt Arrangement Scheme (DAS)
For Scots searching for an alternative to a Trust Deed, a Debt Arrangement Scheme (DAS) could offer a potential alternative.
Like a Trust Deed, a DAS allows you to freeze interest on debts and make repayments over a period to suit you. Managing several debt repayments can be stressful and a DAS can offer breathing space for those worrying about covering repayments.
Debts such as utility bill arrears, credit and store cards and overdrafts can be included in a DAS with the arrangement offering protection from creditors taking legal action against you as you make your repayments. Creditors are also prevented from contacting you during your agreement.
However, when considering a DAS it’s important to note that you will be required to pay back your debt in full over an unspecified length of time – there is no debt forgiveness.
Debt Management Plan (DMP)
A DMP is a way for someone struggling with their unsecured debts to manage their repayments but can afford to pay smaller monthly instalments.
This is an informal debt solution, which means that unlike a Trust Deed or a DAS it is not legally binding. This arrangement is put in place when either you or a third party negotiate lower monthly repayments with the people you owe money to.
This repayment schedule is based on affordability which means that the repayments will take longer to make than stated on your original agreement. DMP repayments are usually flexible, which means if your circumstances change your repayments can be revised,
There is no debt forgiveness with a DMP and although creditors may agree to freeze interest, this isn’t a guarantee.
Individual Voluntary Arrangement (IVA)
An IVA is one of the most popular debt help solutions for those living in England, Wales and Northern Ireland.
A formal, legally binding solution an IVA allows you to repay your debts using a single, affordable monthly payment which is divided between the people you owe money to. At the end of the arrangement, the balance of any debts included within the plan is written off.
Unsecured debts including payday loans, overdrafts, credit cards and debts to family and friends can be included in this arrangement, to name just a few.
Lasting for between five and seven years this arrangement is an option for those who owe £6,000 or more to at least two creditors.
Repayments are made based on your affordability, however, it’s important to be aware that this will mean restrictions on your expenditure.
Debt Relief Order (DRO)
Living on a low income can sometimes make accessing debt help a little more difficult, however, for those in that situation a DRO could be a suitable option.
It is a formal agreement available to people living in England, Wales and Northern Ireland with debts less than £20,000 and low assets. The eligibility criteria for a DRO is strict and is often an alternative to an IVA for those who don’t qualify because of their debt level or affordability.
A debt relief order pauses repayment on your qualifying debt, meaning you don’t need to make any payments for up to 12 months. If you’re still unable to cover repayment costs your debts will be totally written off.
Minimal Asset Process (MAP)
Scottish residents seeking a debt relief arrangement like a DRO should consider Minimal Asset Process.
Open to people living in Scotland in a MAP also has strict eligibility requirements. To be able to enter you must have been in receipt of income related benefits for at least six months, not own an asset worth more than £1,000 (except for a vehicle which cannot exceed the value of £3,000) or be confirmed by the Common Financial Tool as having no disposable income.
The debt level must also exceed £1,500 but be less than £17,000 to qualify.
A form of Scottish bankruptcy, Sequestration is a formal insolvency process which involves a Trustee taking control of your estates and deal with creditors of your behalf.
This is an option if you are unable to repay your debts as they fall due and can allow for 100 per cent of your debts to be written off.
You will be discharged from sequestration after a year, however, if you can afford to do so you will have to make monthly payments based on your surplus income for four years. Your assets, including your home if there is equity, may be sold to repay your debts.
Sequestration, just like bankruptcy, should only ever be considered as a last resort and you should always seek alternative support is available.
If you’re looking for your insolvency match, speak to our experienced debt experts on 0808 2085 195 to net a solution that best suits your circumstances today.