In Scotland personal bankruptcy can be initiated by a creditor, following a petition to the Sheriff Court by the debtor or in some circumstances by a trustee managing a Protected Trust Deed.
Scottish Bankruptcy Facts
The bankruptcy process is a life changing experience affecting areas including, the capacity to get credit, the ability to open more than the most basic bank account and in some cases it will mean the loss of employment. It is not therefore not a process to be entered into lightly.
Thankfully for many who find themselves overwhelmed with debt there are alternatives. Three of the options are:
- Debt Management Plans (DMP)
- Debt Arrangement Scheme (DAS)
- Scottish Protected Trust Deed
Debt Management Plans
A Debt Management Plan is a non-formal repayment arrangement between debtor and creditor to repay the outstanding debt, with interest frozen, over a longer period of time. For many this is an excellent way of clearing the debt without the spectre of bankruptcy hanging over them. Debt Management Plans can be negotiated directly between debtor and creditor or through a reputable debt management company.
The best advice about whether to go it alone or get some help is most definitely to get some support from a debt advice agency. The down side of a DMP is that a creditor is not obliged, legally or morally, to go down this route. Even if they initially agree to the plan they can change their minds and revert to other methods of debt recovery.
Debt Arrangement Scheme
A Debt Arrangement Scheme is a statutory programme run by the Scottish Government. It is designed to help those with multiple debts repay them without the creditors pursuing them or instigating court action to recover the debts.
The Debt Arrangement Scheme, once it’s agreed freezes all interest and other charges associated with the debt. The amount of time it takes to become ‘free’ of outstanding debt depends on what a person can afford to repay each month. This amount is agreed between the debtor and their money advisors.
Scottish Protected Trust Deed
Like the Debt Arrangement Scheme the Protected Trust Deed is only available in Scotland. The equivalent in other parts of the UK is the Individual Voluntary Arrangement (IVA).
The Scottish Protected Trust Deed is a legally binding document and once agreed the debtor is protected from further action by the creditors. Like bankruptcy, signing a Protected Trust Deed will affect a person’s credit rating for some years to come. A trustee, who must be a registered insolvency practitioner, will administer the Trust Deed.
If the debtor meets the monthly payments agreed they would normally become debt free after three years. However if the payments are not met, the trustee has the power to force the debtor into bankruptcy.
The information in this article is necessarily brief and any person contemplating a debt relief programme in Scotland should contact a reliable and independent financial adviser. The Citizens Advice Bureau is a good place to start.
This article is compiled using journalistic research and is not offered as financial advice.
Source:
Accountant in Bankruptcy, website accessed 31 October 2009
Money Advice Scotland, website accessed 31 October 2009
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