Hundreds of Scots are expected to face insolvency each week and we would like to look at their options.
As household finances continue to take a cut with more job losses and the public sector cuts more Scots than ever will be made bankrupt. If one of these could be you we recommend that you seek out your options as early on as possible this could mean there are more options available to you.
There are many reason people enter an insolvency some of which include divorce, illness, redundancy and overspending.
More and more Scots in middle incomes are entering a solution – quickest growing bankruptcy arrangements are designed for those with jobs.
If you reside in Scotland there are various options if you can no longer cope financially. The options vary depending on your own financial situation, so choosing the correct one is very important so that you should not incur any further difficulty.
Debt arrangement scheme
(DAS) this is where you commit to a debt payment plan, this allows you to repay your debt on one affordable monthly payment.
The length of time this last for varies depending on the amount of debt, and what you can reasonably pay towards it on a monthly basis.
If you are approved for a (DAS) all interest fees and charges are frozen and the creditors can take no further action against you. Your one monthly payment is taken then distributed amongst your creditors.
Protected Trust Deed
(PTDs) are on the rise, they are often used by the more affluent people with jobs and assets. This indicates that society is being affected on all levels.
A PTD allows you to repay as much as your debt as you are able with your assets, it is a formal arrangement made between you and your creditors. It lasts for approximately three years. A licensed insolvency practitioner will become the trustee and put a proposal forward to all your creditors, this will be based on all information you provide income, expenditure and level of debt, also any assets you may have.
To enter a PTD you must be able to prove you have disposable income and are able to contribute monthly something towards your debt.
It is the creditors decision as to accept your proposal and they are given five weeks to consider it. If enough creditors agree your trust deed will become protected and no creditor can take legal action to recover the debt. As long as you comply to repay the amount required within the agreed time any remaining amount will be written off.
Sequestration
The equivalent name for bankruptcy. There are two ways to enter this solution: a creditor can take you to court, if they are owed more than £3,000 this way they can raise bankruptcy proceedings against you, or for the cost of £100 you can make your own application thus avoiding any court action.
To do this yourself you must prove you are insolvent meet the Low Income, Low Assets (Lila) criteria or have a Certificate for Sequestration. Apparent insolvency will mean a creditor has started action over a debt and has served a charge for payment or a statutory demand.
After you have been awarded bankruptcy, a trustee will be appointed they will look after your insolvent estate. You will have to show all your assets and liabilities and you will have to prove your full income and expenditure. If you have assets they will be sold for your creditors; if you have any disposable income you may also be asked to make contributions. Some assets do not have to be sold for your bankruptcy and trustees have a guideline on how to deal with this.
As long as you co-operate with your trustee, you should be discharged from your bankruptcy after one year.
Low Income, Low Assets
(Low Income, Low Assets bankruptcy) Lila was introduced to help people who need debt relief but are unable to establish apparent insolvency.
It is suitable for people on very low incomes with few or no assets. In the last three years around 20,000 Scots have gone for this solution. This can provide short term relief from debt, however it stops many getting credit in the future and means for some there is no choice but to re enter bankruptcy.
Sequestration certificate
This is the newest kind of personal insolvency legislation; this was introduced for people not suitable for a Lila or a Ptd.
A Certificate for Sequestration is given by a money adviser or an insolvency practitioner, after gathering all information on an income and expenditure and receiving documentation (statements, pay slips, etc), they will certify that you are unable to pay your debt.
When you go this way into bankruptcy, you must sign the application within 30 days of signing the application pack.
Consequences
Sequestrations, PTDs and DASs all have a serious effect on your credit rating this normally lasts for up to six years.
Sequestration or a PTD should be entered as a last resort. They should not be entered lightly as they have a serious impact on your credit rating. For some with huge debt that they will never be able to clear they chose this route. Some creditors put so much pressure on people that they can suffer with stress because of their debt.
If you are having debt problems and are finding it difficult to repay your debt it is crucial that you seek debt advice as soon as possible.
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