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Debt is now a fact of daily life for those who live in Scotland. However, personal debt levels are soaring and people in Scotland are increasingly facing significant financial difficulties. The trick when starting to worry about debt is to seek advice from a qualified advisor or debt support agency. There are a wide range of different such organisations available, and they will help give you the specialised advice and support you need to make the right decisions in a worrying time.
If you fall behind on payments to creditors, the situation can easily snowball - particularly if you have a number of different debts. If you don't take a proactive approach to mitigating the situation, you may find yourself increasingly bothered by creditors - and eventually taken to court for non-payment of arrears. This is the worst kind of scenario. As well as the stress of going to court, if you find yourself in a Scottish court due to debt, they can make you pay through various forms of enforcement - eg:
Arrestment - where assets held by third parties are frozen - for example, funds in a bank account, or if you're working - earnings arrestment, where money is taken directly from your wage to pay back a debt.
Attachment, where goods are frozen, for example a car, which can be sold at an auction, with the proceeds going to creditors.
However, there are ways to avoid this 'worst case' scenario, which we will now look at in detail.
Traditionally people tend to think of bankruptcy - or sequestration in Scotland - as the way out of overwhelming debt problems. However, it should generally be the final option for those seeking debt solutions. It's advised that people in Scotland experiencing debt problems should first consider either a PTD or DMP. There are slight differences between the two, which a money advisor can explain, but the benefit is that both schemes help you to pay back creditors without resulting in the same damage to your credit history as a sequestration. (Although if you do find sequestration is appropriate for you, do seek support from a sequestration support service, where specialised advisors will be able to give you the support and guidance you'll need through this process.)
Protected Trust Deeds(PTD) are used in Scotland in the same way that IVAs are used in England for people experiencing debt problems. A PTD is a formalised legal commitment, that once approved, allows you to pay off only what you can afford - and have the remaining sum written off after three years. Although the laws in Scotland are different to English legislation, the ultimate result and underpinning principles are similar. For example, upon acceptance of a PTD, interest and charges become frozen and any unpaid debt is written off at the end of the agreement - usually a three year period.
Alternatively Debt Arrangement Schemes (DAS) were introduced by the Scottish Government as a debt management tool, which has the additional benefit of often being free. This scheme can help you to pay your debts in a planned and managed way through a Debt Payment Plan (DPP), removing the worry of being pressurised by your creditors - which could otherwise lead to you losing your home.
The DPP allows you to pay off your existing debts over an extended time period, and can be for any money amount, or for any length of time deemed reasonable under the terms of the scheme. Again, the scheme also protects you from sequestration and court orders - and once your DAS payment plan is approved, you'll have the opportunity to freeze creditors' interest rates, charges and debt fees.
The Debt Arrangement Scheme (DAS) gives you both help and the time to pay your debts - some extra 'breathing space' and the specialist advice you need to work your way out of a difficult debt situation. It's for people with more than one debt, and a single payment will be made to a single payments distributor. All you need is some surplus income and commitment to the plan - your creditors won't be able to take out enforcement actions against you if you stick to your agreed terms. It also has the benefit of being a free scheme for people paying off debts under an approved debt payment programme (DPP) - however, it's advised that you check this first with your financial advisor before entering into a DAS agreement. Remember too that once you've successfully worked through a DAS plan, you will have demonstrated your ability to manage money successfully once again - which should give you a good grounding point to start over with creditors.
Once you are on a DAS scheme, there are five parties involved - you as the debtor - who will enter into a DPP - Debt Payment Programme (DPP) under the DAS, your creditors, a DAS administrator - who is responsible for the register which contains all the details of such programmes, the DAS money adviser- who will give you the right advice - and finally the Payments Distributor, who will organise distribution of the sums you, the debtor, will pay to creditors as per the details of your DPP.
Creditors will be bound to adhere to the terms of your DPP as long as they've agreed (or are deemed to have agreed by not responding) and for as long as you stick to the terms of your agreement. Even if your creditors don't give their consent, then the DAS administrator still has the right to approve the DPP if it's been deemed fair and reasonable.
Remember, if your personal circumstances change - eg, if you find yourself in a better paid job, or lose your existing income, then the programme can be changed again to take account of such changes - again, so long as creditors agree to changed terms, or if the DAS administrator feels it passes the 'fair and reasonable' test.
These points above are a basic introduction to the various debt management schemes on offer, but of course it's vital that you speak to a qualified money manager first to find the right scheme for you.
