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Tackling your debts

Dealing with debt problems in Scotland

Posted 15 March 2012

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If you're a Scottish resident struggling with your unsecured debts, there are some 'Scotland-only' debt solutions that could help you.

Citizens Advice Scotland (CAS) has said that it is expecting the number of people with debt problems in the country to soar over the next few years, as the current climate continues to weigh heavily on many people's finances.

CAS said that the Money Advice Trust (MAT) has predicted a 21% rise in the number of Scottish people going into debt, based on research into the effect of public sector unemployment in Scotland.

Currently, CAS said that over a quarter (26%) of cases it deals with are debt-related, with the average debt owed in these cases racking up to over £14,000.

Although it's concerning that increasing numbers of people could face debt problems further down the line, there are some debt solutions exclusively available in Scotland that could provide a realistic approach for anyone struggling to repay what they owe.

There are various debt solutions available in Scotland. Let's take a look at a few 'Scotland-only' approaches to debt that could, depending on what situation you're in, be ideal for you.

Can you no longer repay your unsecured debts as agreed?


If you have one or more unsecured debts and you can no longer afford your agreed monthly repayments towards them, the Scottish Government-backed Debt Arrangement Scheme (DAS) could help you repay your debts at a manageable pace once again.

DAS is a government-run debt management tool. If you enter DAS, you'll agree a Debt Payment Programme (or 'DPP' for short), which outlines how you'll repay your unsecured debts with monthly payments you can afford.

Once a DPP under DAS has been agreed with your unsecured lenders, you will:

• Make lower monthly payments, based on what you can afford after your basic living costs (mortgage/rent, bills, food) have been covered
• Be protected from any further action from your unsecured lenders
• Have interest frozen on your unsecured debts, so they won't grow as you're in the process of repaying them.

Do you have more questions about how DAS works? You could visit our DAS page for a more in-depth look at this approach.

All debt solutions come with downsides, however - making lower payments will affect your credit rating for six years, and your details will be recorded on the DAS Register.

Can you not repay your debts in a reasonable timeframe?


If you have unsecured debts that you've fallen behind on and you can't afford to repay them in a realistic amount of time, a Scottish Trust Deed could be an ideal approach.

Although a Trust Deed is exclusive to Scotland, it works in a similar way to an IVA ('Individual Voluntary Arrangement') in England, Wales and Northern Ireland. We answer some of your FAQs about Trust Deeds here.

A Trust Deed is a form of insolvency, designed to allow struggling borrowers to repay whatever they can afford over an agreed period.

If you agree a Trust Deed with your unsecured lenders you will:

• Make reduced monthly payments, which will fit around all your essential outgoings
• Stop any further demands from your unsecured lenders
• Have any included debt you can't afford to repay written off on successful completion - usually after three years.

Your credit rating will be damaged for six years from the day your Trust Deed begins - and if you're a homeowner, it's likely you'll have to release equity on a Trust Deed.

What's the best approach for me?


People can be in very different situations with their debts, which will have a big impact on the most suitable approach for them to take.

If you're unsure about how to deal with your problem debts, discussing your options with professionals could really help. We could help you find the most suitable approach.

by Sarah Symons

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.