Sequestration isn’t the only debt solution that’s available to Scottish residents. Each has its own benefits and consequences, and which one is the most suitable for you depends on your individual circumstances. To enter any formal debt solution, you’ll need to speak to a debt expert, like us, and we’ll be able to advise which is most suited to your situation.
Minimal Asset Process
The Minimal Asset Process (MAP) is a simplified, lower cost route into sequestration that may be suitable if you can’t afford to repay your debts at all. MAP has strict criteria that you need to meet to be eligible, which includes having no income left over to pay your debts after you’ve paid for all of your essential living costs, and relatively few assets.
Whilst you’re on MAP, payments on your debts will be suspended and any outstanding unsecured debt that is included in your MAP will be written off if it’s successfully completed. This is usually after six month, as long as your circumstances don’t change and you co-operate with the Trustee, which is a shorter timeframe than sequestration.
As MAP is a form of sequestration, it does have consequences. It’ll have an impact on your credit file for six years from when it begins, though it may continue to have an impact on your ability to get credit for longer. Your details will be included on the Register of Insolvencies, and this register is publically available
Read more about MAP in our detailed here.
Debt Arrangement Scheme
The Debt Arrangement Scheme (DAS) may be a suitable solution if you can’t currently afford your monthly payments towards your unsecured debts, but you can afford to make a lower monthly payment.
You and your lenders will need to agree to a DAS Debt Payment Programme (DPP) that’ll state how much you will pay each month. This single, lower payment will take into consideration your essential bills, which include things like your rent, mortgage, utility bills, travel costs and food. This means this payment will be both affordable and sustainable for you. The DPP will also freeze interest and charges if you adhere to the terms of the agreement – if your DPP fails, however, your lenders can reapply these charges.
There are consequences to DAS. Reducing your monthly payments will affect your credit rating. It’ll show on your credit file for six years, and in the DAS register whilst it is running, which is publically available, and this will make it more difficult for you to obtain credit.
Read more about DAS in our detailed guide here.
If repaying your unsecured debts within a reasonable amount of time is unrealistic, a Trust Deed might be able to help. It’s a Scottish form of insolvency that lets you pay back as much of your unsecured debts as you can. This is usually over a four year period and any included debt that is left over at the end the four years will be written off.
Providing your lenders don’t object to your Trust Deed, you’ll make one regular payment to your Trustee. They will then distribute the money to your lenders after deducting his/her costs. Your lenders will expect you to pay as much as you can, but this amount will be affordable for you – taking into account the money that you need for your essential living costs, which includes your rent, mortgage, utilities, food and travel expenses.
Trust Deeds come with consequences as well as benefits. If you own your own home, you may have to release some of the equity in it to repay your debts. If you aren’t able to do this for some reason, your Trust Deed could be extended by 12 months. Your Trust Deed will also be recorded in the publically available Register of Insolvencies. If you do not meet the terms of the arrangement at any point, it could fail and you may face sequestration.
Read more about Trust Deeds in our detailed guide here.
Debt Management Plan
If you’re struggling to afford your current monthly unsecured debt repayments, but could manage a regular reduced payment, a Debt Management Plan may help. You can continue to make payments towards your debts, whilst ensuring that you are left with enough money to cover your essential living costs – things like your rent, mortgage, travel costs, utilities and food.
You or a Debt Management Plan provider can speak to your lenders to try to negotiate new lower monthly payments that are both affordable and sustainable for you. You (or your provider) can also ask that your lenders freeze the interest and any charges on your account, and although they‘re not obliged to agree to this, they often do, as long as they can see that you’re genuinely struggling with your finances and that your offer is fair to both you and them.
Debt Management Plans do have consequences. As an example, as you will be reducing your monthly payments, you won’t be keeping up with the payments you agreed to when you first took the debts out – this will be recorded on your credit file for six years. This will affect your credit rating and means that it’ll be harder for you to obtain credit during that time.
Read more about DMPs in our detailed guide here.
Debt Consolidation Loan
If you want to simplify your finances, a debt consolidation loan may help. A debt consolidation loan allows you to repay your debts at a reduced rate over a longer period of time.
The loan involves taking out new credit to pay off your existing credit, and this will allow you to combine your multiple existing debts into one, more manageable, monthly payment. This means you only have one payment to deal with each month, rather than having to make lots of smaller ones to multiple lenders, and the amount you pay each month should reduce too. However, as you’ll be repaying your debts over a longer time period, you may end up paying more overall.
You can apply for unsecured loans, or ones that are secured against your home. With a debt consolidation loan, you need to be sure that you’ll be able to meet the monthly repayment, otherwise you could end up owing even more. This is particularly important if the loan is secured against your property, as missing repayments could result in your property being repossessed.
Read more about debt consolidation in our detailed guide here.