Advantages and Disadvantages of Statutory Debt Solutions

Our trusted experts can help find the right solution for your circumstances.

We offer a full range of debt solutions and advise the advantages and disadvantages of each statutory debt solution.

Our specialists will talk you though the options available to you so you can make an informed choice.

A consultation can be arranged at a time to suit you, in person at a convenient location, or by telephone.

Debt Arrangement Scheme (DAS)

What is a DAS?

The Debt Arrangement Scheme, set up by the Scottish Government, helps people repay their debt at a manageable amount over an agreed period.

How does a DAS work?

A DAS stops creditors taking action against you and freezes their interest and charges while you repay what you owe over an agreed period.

It's the only debt management scheme for repaying debts that is legally binding on your creditors, and stops interest and charges accruing.

Under the scheme, your budget is assessed, and one single monthly (or weekly) payment is agreed with you. This is paid into the Debt Payment Plan (DPP), and distributed to your creditors.

A key feature of a DAS is it doesn't to take account of any assets you have, such as your car or home.

What is the process to get a DAS?

The first thing to do is to contact an Approved Money Advisor. We won't send you elsewhere - one of our team can act as your Approved Money Advisor. We'll discuss your personal circumstances with you to make sure a DAS is the most appropriate option for you.

The next step involves creating a realistic budget for you, and from the budget you will agree the amount of the single monthly (or weekly) payment that will be paid to your DPP for your creditors.

We'll then submit the details of your DAS to your creditors. Your creditors will have a period of 21 days to advise your Approved Money Advisor if they object. If no creditors object to the proposed plan, then its details are submitted to the DAS Administrator (The Accountant in Bankruptcy is an office of the Scottish Government), and the DPP will automatically be given approved status.

If any of your creditors do object, then the DAS Administrator would consider whether your DPP is fair and reasonable, and if so, approve your DPP (regardless of any of your creditors objections).

What if my circumstances change?

If any of your circumstances change and this affects your ability to carry on with your DPP under its original terms, then we can put forward an appropriate amendment to the DPP to your creditors. Creditors have the opportunity to object to this, and as with the approval of the DPP initially, the DAS Administrator will consider whether or not your amended DPP is fair and reasonable, and if so, approve your DPP amendments.

If you miss payments during your DPP or if a creditor makes a successful application, then your DPP may be revoked.

How much does a DAS cost?

Fees will be applied for the administration of your debt payment programme. You will not be responsible for paying these. They will be deducted from the payments you make before your creditors are paid. The DAS Administrator fee is 2% and fees for the others involved in the programme is 20% of the sum due to be paid to your creditors. Therefore, if you complete the debt payment programme you will have paid your debt in full with your creditors receiving 78% of what they were owed.

When a DAS may not be right for you

You must have sufficient disposable income to pay off your debts in full and must do this over a fair and reasonable time. If this cannot be achieved, then it may be appropriate to consider one of the other debt solutions offered by WB Debtcare. Your Approved Money Advisor will go over this with you.

What will happen to my house?

If you continue to pay your rent, mortgage or secured loans your house will not be at risk. Your Approved Money Advisor will have to know the financial details of your property. Once your DPP is approved and remains in force, creditors will not be able to take any action against your home. Your Approved Money Advisor will be able to advise you on this in full.

Trust Deed

What is a Trust Deed?

A Trust Deed is a legally binding agreement with your creditors to repay all or some of the debt. This solution is based on what you can afford to pay, usually over 4 years. At the end of this period any remaining debt is written off.

How does a Trust Deed work?

Trust Deeds place your assets (your property and belongings) in the hands of a third party, known as your trustee. Your trustee will take care of your financial affairs. They aim to repay creditors as much of the debt owed as possible.

This may involve some of your belongings or property being sold so that the money raised can be paid to your creditors.

A notice of the deed is placed in the Register of Insolvencies, creditors are contacted and given five weeks to object to it. Subsequently, the Accountant in Bankruptcy (AIB) registers the Trust Deed as protected.

How does a Trust Deed become Protected?

If the majority of your creditors are satisfied with the terms of the Trust Deed, it will become Protected. This means government legistlation, the Bankruptcy (Scotland) Act 2016, will back your Trust Deed.

A Protected Trust Deed means it's legally binding on all creditors and can't take action against you to recover the debt. Creditors have a five week limit to object.

The process from signing the Trust Deed to registering as Protected takes about seven weeks.

What will happen to my home?

We understand you may worry about your home, and this will help determine whether a Trust Deed is the best solution for you.

The Trustee only has an interest in any equity in your home, and provided the circumstances are appropriate, this equity can be properly managed (for example by an extension to the Trust Deed duration, or by the exclusion of the home from the Trust Deed).

Our trusted experts will discuss and inform you of the options available to you.

What will happen to my car?

This will largely depend on whether your car is owned or Hire Purchase; its value; and how alternative travel arrangements would affect your family budget.

The key to a successful Trust Deed proposal is to get the right balance between your interest in retaining your car and the financial return to creditors. We structure our propsals with this in mind.

How are the trustee's fees paid?

Your trustee will expect to be paid a fixed administration fee and an additional fee based on a percentage of funds collected during the Trust Deed for the work done in administering it. Once the trustee’s fixed fee has been set it may only be incresed with the consent of creditors or by the Accountant in Bankruptcy. Your trustee will be paid before any money is available to repay your creditors.

Sequestration

What is Sequestration?

Sequestration is the Scottish term for Bankruptcy. Sequestration is a viable debt relief solution for individuals in financial distress, and access to Sequestration is now available to anyone unable to pay their debts as they fall due.

What is the process for Sequestration?

Once you have successfully applied for your Sequestration, a Trustee will be appointed to deal with your estate. Your estate includes all debts and your assets (property and belonging).

Following your Sequestration, your creditors must deal directly with your trustee. Creditors aren't allowerd to pursue you or take action against you to recover the debt.

Your trustee’s responsibility is to realise assets and determine if you can afford to make a contribution from your income for a period of four years. Your trustee will divide up the monies gathered equally amongst your creditors, and your creditors must write off the remaining balance.

There isn't a legal requirement as part of the Sequestration for your creditors to receive any payment, and sometimes they may not receive anything. If your estate doesn't have sufficient funds to enable any payment to be made to your creditors, then they will legally have to write off the debt owed to them.

How will my trustee deal with my assets (property and car)?

Your trustee doesn't have to deal with your rented property, or your home if there is no equity (you owe more on the mortgage than the house is worth). Where there is equity in your property, it is only that equity that the trustee has interest in.

Where there is an asset that the trustee must deal with, the asset does not necessarily have to be sold, although it can be. For example, a third party you propose (such as a family member, friend, or relative) may buy out the trustee’s interest in the asset, or you may buy it out after your 1 year discharge. A buy-out may be by instalments over an agreed repayment period. This is most commonly how any interest in the equity in your home, or your car would be dealt with. Most other assets are generally sold.

Our trusted specialists will guide you through how your assets will be dealt with before you commit to enter the Sequestration process.

How do I apply for Sequestration?

You apply for Sequestration by completing an application form and submitting it to the office of the Accountant in Bankruptcy. If you choose to have a Trustee from Wbg deal with your Sequestration, we will assist with your application.

The qualifying criteria is that you must owe at least £1,500 in total, and one of the following must apply:

• A qualified individual certifies that you're unable to pay your debts as they fall due (our Insolvency Practitioners are qualified to do this).
• Wbg can take care of the process of certifying that you're unable to pay your debts as they fall due and submit your application.

Why is it best to have a Wbg trustee deal with my sequestration?

You can appoint either the Accountant In Bankruptcy to act as your trustee, or a private licensed Insolvency Practitioner (such as Wbg's Insolvency Practitioners).

Unlike nominating the Accountant in Bankruptcy, if you nominate one of our experts, you'll be able to discuss your problems with our specialists before making a final decision. This enables you to understand beforehand how much of a payment for four years will be expected from your income and agree how any assets you have will be dealt with.

We've been delivering debt solutions for over 30 years and undertake Sequestrations on behalf of the Scottish Government. As a result, we're best placed to make sure your Sequestration is conducted in line with the modern standard.

Wbg's Insolvency Practitioners can act for you where you owe at least £6,000, and are in employment with scope for some surplus income, or have assets in your estate.

I'm working, how much of my income will I have to pay, and for how long?

You will be assessed according to your own individual circumstances and by using the Common Financial Tool.

The aim of Sequestration is to provide debt relief - as such you will return to a better financial standing than the position you were in when paying back what you owe.

The payments you make from your income will be for no more than four years.

If you're unable to make any payments from your income and have no assets, then we will direct you to the Accountant in Bankruptcy to deal with your Sequestration.

What can't I do during my Sequestration?

You may be discharged from your Sequestration after one year, and your Trustee will still be there to deal with your income payments for the four-year period. During that one year prior to your discharge, there are certain restrictions on you. These are some of the main ones restrictions:

• You are limited to what further credit you can take on.
• You may not act as a Director of a limited company.
• You may not take on certain public offices.
• If you acquire any assets (e.g. an inheritance or lottery win) then these must go to your Trustee).

How much does a Sequestration cost?

The costs of administering your bankruptcy will be met from funds accumulated from the sale of your assets and the contributions you make from your income. These include the fees and costs of the trustee and will be paid before any payments are made to your creditors. The fees are charged on a time on-line basis and will be audited by the Accountant in Bankruptcy and approved by creditors.

How to get in touch

To explore the options available to you, simply call our dedicated team on 0141 566 7038.