Entering the right solution for debt isn’t always easy. The rules and criteria is often confusing and complicated. Furthermore, there is often more than one applicable debt solution, so you could have a choice to make.
We aim to make understanding debt solutions easier with information one each of our debt solution pages. We also have our forum where you can ask any question about a debt solution.
What Debt Solutions Should You Enter?
When deciding on the best solution to resolve debt problems you must consider a few important points. For instance:
- When you subtract your essential expenditure away from your income, how much is left each month to pay towards debts? (This is known as disposable income)
- How quickly do you want to become debt free?
- What assets do you have (e.g. house, car etc)
- Are any of the debts joint? If so, do you know what will happen when you enter a debt solution?
- Is your personal or financial situation likely to change during the debt solution? (This could affect your viability to complete the solution).
Debt Management: A debt management plan is an informal debt solution (it can be stopped with one month’s notice) and requires you to make one monthly payment towards your debt each month. You continue the debt management program until all of the debt is repaid. Interest and charges in a debt management plan are not guaranteed to be frozen.
IVA: An Individual Voluntary Arrangement is a proposal you make where you agree to make a regular monthly payment towards your debt. The IVA usually lasts for 5 years and at the end of the solution any remaining debt is cleared. Your interest and charges are guaranteed to be frozen. In an IVA any equity from a house, car or other asset would be considered too.
Bankruptcy: A debt solution which provides protection from your creditors. You may have to pay a monthly payment towards your bankruptcy for three years. Bankruptcy will write off the debts at the end of the solution which you can’t afford to repay.
Scotland Only Debt Solutions
Debt Arrangement Scheme: A DAS is a formal debt solution where you repay all of the money you borrowed, but over a longer than agreed period. All interest and charges are frozen in a DAS, as long as your creditors accept your proposal.
Protected Trust Deed Scotland: A Trust Deed is a debt proposal offered to your creditors where you make one payment each month. Any debt at the end of the solution which is not repaid is written off. All interest and charges will be cleared at the end of the debt solution too.
Sequestration: There are two routes into sequestration in Scotland; the LILA and certificate of sequestration. You are sequestrated for 1 year and may have to pay towards your solution each month for three years. At present, the application fee to enter sequestration is £200.
Please note, any debt solution will affect your credit file for 6 years. You should seek professional debt help prior to entering any debt plan.