What is a Debt Relief Order and how does it work?
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If you live in Scotland and you’re struggling to put anything towards your debts, MAP could be the answer. Learn how it works and if it could be right for you.
If you’re unable to deal with your debts and they are becoming a problem, there’s always a solution. Which solution suitable for you just depends on your circumstances. In this blog we’re going to going to look at Minimal Assets Process (MAP) as a possible solution for people struggling with unmanageable levels of debt in Scotland. If you live in England, Wales or Northern Ireland a Debt Relief Order is a similar solution that could work for your circumstances.
The benefits of MAP
MAP is a solution designed to help people with low assets and no disposable income, or who have an income made up solely of benefits, with their debts. It replaced the LILA (Low Income, Low Assets) process in April 2015, and offers a simplified route into bankruptcy, lasting only six months. If you’re really struggling to pay anything towards your debts, MAP can provide a welcome relief from that pressure and ensure that you’re able to see a point in the future where you will be debt free. Once you are, you’ll be able to start again, financially speaking, and should find that your overall situation improves.
If you qualify for this solution, the payments you make towards your unsecured debts included in your MAP would be suspended for the time that it runs and, as long as everything goes to plan, they will be written off completely at the end.
MAP is a legally binding way to deal with insolvency, so if you’re definitely unable to repay your debts, MAP can provide protection from any further legal action from your lenders and should stop you from receiving any letters and calls from them chasing you for outstanding money too. This should mean the end of worrying you’ll be summoned to court or receive a visit from the sheriff officer.
Do I qualify for MAP?
MAP was designed for people who are struggling with problems debts, but have low assets and no disposable income (that’s the income that you have over after you’ve paid all your important living costs, such as rent, taxes, utilities, travel, food and so on), or who have an income made up solely of benefits. As such the qualifying criteria is quite strict. Let’s have a look at the situation that you’d have to be in for MAP to be a viable option.
• You can’t owe less than £1,500 or more than £17,000
• You can’t have any disposable income to put towards your debts, or your income is made up solely of benefits
• You can’t have a single asset worth more than £1,000 or a car worth more than £3,000
• Your assets can’t be worth more than £2,000 in total
• You must have first sought expert advice from an approved money advisor or insolvency practitioner
• You must be a resident of Scotland
• A money advisor has to agree that you don’t have any money left over for your debts, after your essential bills have been paid, or your income is made up solely of benefits and you have been in receipt of these for more than 6 months.
• You cannot own land or property
What cost is involved?
To go ahead with the MAP process there is a fee of £90 and there are no exceptions to this. There is nothing else to pay – for example you don’t have to make a monthly contribution towards your debts if you do qualify, as it’s aimed at people who cannot afford to make payments at all.
What kinds of debts can I include on MAP?
If you qualify for MAP it can help you deal with your unsecured debts. So you could get debt relief from loans, (not secured against anything you own) credit cards, store cards, overdrafts and catalogue debt. You can’t, however, include any secured loans, or HP, student loans, court fines or arrears of child maintenance.
Are there any negative effects of MAP?
There are some negative effects of going through MAP, just as there would be if you were to become bankrupt. It will bring your credit score down, as you would no longer be sticking to your contractual credit agreements. This would be recorded on your credit history for six years from the date that you started MAP and may mean that you find it more difficult to borrow in the future or that you have to borrow at a more expensive rate.
There may also be some professions that are not compatible with this debt solution. For instance, you may not be able to carry on with a job that requires you to handle money, or be the director of a company. Some employers have a section in their contract of employment that states you wouldn’t be able to carry on in the role if you were to become insolvent. So if you’re in any doubt about what would happen to your job if you entered into MAP, you should check the contract that you signed, or speak to your employers HR department in confidence about it.
As we’ve mentioned, one of the requirements of MAP is that you seek professional advice first. When you get this advice, you may learn that your job is incompatible with MAP. If this happens, the advisor will look to see whether there is another more suitable solution for you.
If you find that your circumstances improve whilst going through MAP, you may have to go through the full Sequestration process instead and may then be expected to pay something towards your debts.
It’s best to check with you bank that they would be happy to keep you as a customer if you were to go bankrupt and if you had debt with your bank then you have to move your account. If you have to move you may just have to go for a fee-free, basic bank account instead. Basic bank accounts don’t come with any added extras like overdrafts, however, with these accounts you will be able to keep your money safe, arrange for direct debits to be paid out, your wages and benefits to be paid in and will allow you to use a debit card.
Alternatives to MAP
When you speak in detail about your situation with an expert, you may find that there are other solutions that would be better for you. Trust Deeds for example, are available in Scotland and are designed to help people with unmanageable debts. With this solution you would need to pay something back every month towards your debts, but this would only be what you could afford and after four years the rest of your unsecured debts would be written off.
This may be a better option if you’re a home owner, as you are able to keep your home on the provision that you try and release equity and put that money towards your debts.
Or you could find that your situation means you need to go through the full Sequestration process rather than MAP. After Sequestration is over, your unsecured debts would be written off just like with MAP. Unlike MAP, however, it would last for a year and you may be expected to put something towards your debts every month – it just depends on what you can afford.
Lastly, Debt Arrangements Schemes (DAS) are also available as a route out of debt in Scotland for people who are in a different type of situation with their debts. If your lenders accepted one of these arrangements, then your monthly payments would be lowered to a level that you could cope with, but you would still end up paying everything back that you owe – no debt would be written off at the end. This means that you will end up paying your debt back over a longer period of time.
DAS offers some legal protection like the other solutions as well. If your lenders agreed to the DAS, they would be legally bound to the new payment plan and could therefore take no further legal action against you to try and recover the money that you owe. Have a look at our DAS page for more information.
The first step towards getting debt free
The first and most important step towards getting debt free is always speaking to an expert, who can tell you which solution would be right for you. This is so important that you’re not actually able to apply for MAP unless you’ve received professional advice and you use a recognised expert to guide you through the process. Make sure you take that first step towards a debt free future by speaking to one of our advisors using the options to the left.
by Christine WalshBack to blog home