The debt arrangement scheme increases in popularity

23rd May 2011

Recent statistics from the Accountant in Bankruptcy have revealed the overall number of insolvencies (bankruptcies and protected trust deeds) is continuing to fall. They’re down 18% compared to the (admittedly high) figures from the same period last year.

The opposite has been the case with the Debt Arrangement Scheme . The number of people choosing to use the debt arrangement scheme to deal with their debts is on the increase; up 15% on last year’s figures.

A trust deed is typically used by an individual who is in a position to be able to contribute a reasonable sum towards their debts each month but who is unlikely to be able to repay the full outstanding balances owed. After a certain amount of time meeting the commitments of a trust deed any unpaid amounts will be written off (as part of the terms of the trust deed).

By contrast, a debt arrangement scheme requires the full repayment of all debts outstanding. The individual choosing to use the scheme is assisted by having the option to elongate their repayments so that the outstanding amount can be repaid at an affordable rate.

As such it might be assumed that those who select a debt arrangement scheme rather than a Scottish trust deed make this choice because their debts are lower and therefore more easily repaid. This isn’t necessarily the case however, as many other factors influence the decision.

Some individuals are in a position to make a very significant contribution towards their debts each month, albeit one that falls short of the full contractual repayment total. In this scenario the anticipated repayment term under the debt arrangement scheme may be little different to that of a trust deed.

Other people work in professions where formal insolvency (such as a protected trust deed) would affect their employment status. This is often not the case with a debt arrangement scheme, although individuals should still check their contract of employment to make sure.

Anyone with significant equity in their homes faces a dilemma when considering a trust deed. The equity will need to be released as part of their trust deed commitments. However, mortgage lending to those with a damaged credit rating has for all intents and purposes ceased. This gives rise to the possibility of having to sell the home. The same cannot be said for a debt arrangement scheme; in this case the equity in a home is not brought into consideration in the same way.

A significant number of people take the view that they wish to repay their debts in full, accepting of the fact this is likely to take some time. The debt arrangement scheme can assist in this process and is therefore favoured by some people on ethical, moral and even religious grounds.

Both the debt arrangement scheme and protected trust deeds offer those concerned about their debts a serious choice about how to structure their financial recovery. As the number of trust deeds falls and the number of debt arrangement schemes increases it seems that awareness of the value of this option is becoming more widespread.

If you would like to know more about the debt arrangement scheme and how it could help you out of a difficult situation, the Trust Deed Forum provides you with a wealth of information, advice and support from a range of industry experts and members of the public who have found themselves in a similar situation.

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