A Third of Debtors Have No Solution to their Problems

20th September 2010

Reported in The Guardian on 8 th September is the worrying finding from The Consumer Credit Counselling Service that 32% of those who contacted them in the first half of this year had, “no appropriate solution to their debts”. The only course of action was to earn more money, which is of course, not always a practical solution.

This situation results from the fact that household expenditure, even without making any unsecured debt repayments, was running at higher levels than household income. This situation might result from redundancy, loss of overtime or increased costs due to a change in family circumstances.

Such figures may represent difficult reading but there is reason to believe that the situation in Scotland may be in some ways less severe than in other parts of the UK.

One of the major barriers to resolving unmanageable debt was the cost of bankruptcy in other parts of the UK (£600). For many people raising such a sum is simply not possible, leaving them in a form of debt limbo. In Scotland a type of bankruptcy with much lower costs (£100) is available to those with lower levels of income and who do not own any significant assets. This form of bankruptcy is known as LILA sequestration.

In addition, Protected Trust Deeds in Scotland represent a more accessible debt solution than the equivalent IVA available elsewhere in the UK. The minimum monthly contribution to fund a Protected Trust Deed is typically lower than that required for an IVA.

Scottish debtors also have access to the Debt Arrangement Scheme. This works in a similar way to a debt management plan (which is available throughout the UK) but provides a greater level of legal protection and protection against further accumulating interest.

The numbers of people suffering debt repayment shocks in the coming period seems likely to increase but Scotland appears to have a more accessible regime for people struggling to get by.

The key point for anyone worried about their debts is to take advice early. In Scotland a wide range of accessible solutions may exist but the longer a debt problem is left unchecked the less attractive the solutions that remain available tend to be.

An excellent source of advice regarding debt management plans and Protected Trust Deeds is the Trust Deed advice forum at www.trust-deed.co.uk.

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