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Tackling your debts

Debt write-off – is it too good to be true?

Posted 08 February 2017

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If you're in debt and you live in Scotland, it's sometimes possible to have your debt written off. Learn more here.

Does it feel as though you’ll be paying off your debts forever? If you’ve heard about debt write-off, it may seem like the answer you’ve been looking for.

But is all as it seems? Can a debt solution really write off your debts – and is there a catch?

The good news

The answer is – you may be able to have some or all of your debts written off. There are a number of debt solutions that allow an element of debt write-off, but in most cases you’ll be asked to repay as much of your debts as you can afford to.

That’s why there’s no set amount of debt that will be written off - it will always depend on your circumstances. So if you’ve seen an advert promising to wipe a large set percentage off your debts, take care. The amount that can be written off all depends on your unique situation – there’s no guarantee it will be the amount you’ve seen advertised.

Let’s look at the options if you live in Scotland:

Trust Deed

If you’re struggling to pay everything you owe towards your debts each month, a Trust Deed may be suitable. You’ll make payments that you can afford to your lenders for four or five years, and then your remaining debts included in your Trust Deed are written off. Homeowners with a Trust Deed are usually able to keep their home.

Because a Trust Deed is a legally binding debt solution, your lenders can’t take any action against you if it’s accepted. And if you take out a Trust Deed, it'll freeze all interest and charges so your debts won’t continue to build up.

Minimum Asset Process (MAP)

This offers an alternative to sequestration (bankruptcy) if you have no disposable income and very few assets. The fee for MAP is £90, and it could let you write off your unsecured debts after six months.

Sequestration (bankruptcy)

If your debts are unmanageable and there’s no way you’ll ever clear them, this could be the answer – although it’s the most serious of the debt solutions we’ve talked about. When you enter sequestration, your Trustee will arrange for some of your assets to be sold so the money can be put towards your debts.

If you can afford to do so, you’ll make payments towards your unsecured debts for around 12 months, after which you’ll be discharged and what you still owe will be written off. You may also have to continue making your affordable payments for another 36 months after that, unless your income primarily comes from benefits. The fee for sequestration is £200.

What’s the catch?

There are pros and cons to every debt solution. For example, they will all impact on your credit history for at least six years, which will make it difficult to borrow in the future.

That’s why it’s important to get proper debt advice to help you choose the right solution for you – which may not be listed here.

Be aware there are some debts that can’t be written off using any debt solution, including mortgages, court fines and child maintenance payments.

But having said all that, one of the options above could allow you to get your finances back under control and let you make a fresh start with your money.

by Kyri Levendi

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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.