Debt Solutions – What You Need To Know

Debt Solutions: Explained

Nobody gets out of debt by ignoring the problem and the fact that you’re reading our website means that you are on the right track. Generally, financial matters can be both complicated and stressful to deal with. It is recommendable that you consult an experienced debt advisor if you are struggling with making your repayments on time.

We recognise that the problems faced as an individual dealing with debt can be wide ranging, and the right solution will depend on your particular circumstances. This is why we take the time to understand you and you circumstances, and why we will discuss a wide range of debt solutions that are available to people in the UK and point you in the right direction. Some of the debt solutions we cannot facilitate however we will point you in the correct direction, such as bankruptcy are complicated, but our debt solutions experts will help you understand them, and their suitability to your situation. Here are the major debt solutions available:

DEBT MANAGEMENT PLAN (DMP)

A debt management plan is an arrangement between you and your lenders that allows you to pay back your debts with a lower and a more affordable monthly payment. The proposed monthly repayment is based on what you can reasonably afford and is arrived at after an analysis of your monthly budget.

Unlike most debt solutions, there is no set duration for a DMP. This is because the plan may differ depending on your circumstances, your total outstanding debts and the amount of your payment each month. Your DMP provider will inform you the proposed duration of your plan your plan begins.

A DMP is a flexible and informal debt solution which is appropriate for you if you are struggling to pay back debts above £1,000. Payments in a Debt Management Plan start from £80 per month depending on your affordability. Most DMP providers will not charge you any upfront fees to set up the Plan. It is important to note that your DMP can be terminated any time your plans change.

If you believe a DMP is the right solution for you, we can refer you a trusted experience provider who can assist you in this. You can also seek help directly by contacting one of the free services.

DEBT ARRANGEMENT SCHEME (DAS)

Debt Arrangement Schemes were introduced by the Scottish Government in 2004.  They were specially designed to help people struggling financially to pay back their debts in a manageable and affordable way. With a Debt Arrangement Scheme, you will have to make a single monthly payment to your money advisor. The money advisor will then distribute the amount among your creditors.  The best thing about Debt Arrangement Scheme is that you can plan to take part with any amount of debt.

One of the major benefits of a Debt Arrangement Scheme is that all charges, penalties, fees or interest on your debts are frozen to allow you to complete your Debt Payment Programme easily. Additionally, provided you maintain payments to your mortgage and care, you do not have worry about losing them.

Another good thing about a DAS is that your creditors are prevented from taking any legal action against you to recover the debts. More importantly, you do not have any direct contacts with your creditors. Overall, a Debt Arrangement Scheme gives you the breathing space you need to allow you to focus on steadily repaying your debts rather than being contacted by your creditors or worrying about losing your home.  

DEBT RELIEF ORDERS (DROS)

A Debt Relief Order (DRO) is an insolvency solution or a formal debt solution that is appropriate if you are struggling with debts up to  £20,000 and you have little or no assets (up to the value of £1,000) with a disposable income of no more than £50 per month. A Debt Relief Order (DRO) is in some cases referred to as a form of mini-bankruptcy. It is also much cheaper and often shorter to do than Bankruptcy.

To apply for a Debt Relief Order you need to determine if you meet the conditions that apply. Our debt advisors will examine your financial situation to determine if it is an ideal option for you.

If a DRO is ideal for you, we will refer you to an approved intermediary who handles these solutions. They will check if you meet the necessary qualifications and help you complete the relevant forms involved when applying for a DRO. To find out more about Debt Relief Orders.

INDIVIDUAL VOLUNTARY ARRANGEMENT (IVA)

An Individual Voluntary Arrangement is a formal debt solution between you and your creditors. It the often the chosen solution for those wishing to become debt free within a realistic time frame, but wish to avoid other solutions, such as bankruptcy. An IVA allows you to repay your debts at a more affordable rate over a set period of time. In most cases, an Individual Voluntary Arrangement will last for 60 months.

An IVA is legally binding, meaning your creditors cannot take any legal action towards you to recover your debts whilst it is in place. Upon successful completion, all the outstanding IVA debts will be written off so you can start your financial life afresh.

BANKRUPTCY

Bankruptcy is a formal debt solution where you legally declare your inability to pay your debts. Sometimes considered a last resort debt solution, but it allows you to start your financial life afresh. When you apply for bankruptcy, you will typically be discharged from your debts within 12 months.

However, it is important to note that bankruptcy comes with severe implications you may want to consider before making your application.

Note that there are two ways you can become bankrupt: By declaring yourself bankrupt, which is known as Debtors Petition or alternatively if you owe more than £5,000 to one of your creditors, they may seek to make you bankrupt, which is known as a Creditors Petition.

SEQUESTRATION

Sequestration is a legal term for Scottish Bankruptcy. It is an appropriate option if you cannot manage to pay back your debts as they fall due. Sequestration allows up to 100% of your debts to be written off.

Sequestration is administered by a trustee, also known as an Insolvency Practitioner. Sequestration is not an ultimate debt solution for all.

Although it has helped lots of Scottish residents get back on their feet, it is recommendable that you first speak to a trusted debt solutions expert before filing for sequestration. You must owe them a minimum of £3,000 in unsecured debts for them to be able to enter you into sequestration. 

 PROTECTED TRUST DEED

A Protected Trust Deed is an agreement between you and a licensed Insolvency Practitioner to repay your unsecured creditors in a more affordable way and over an extended period of time.

A trust deed is only available to residents of Scotland. It lasts for a period of 48 months, after which any outstanding debts that had been included in the Trust Deed are discharged. 

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