Like every other part of the UK, Scotland has thousands of men and women who face serious personal finance problems and who find themselves in need of some form of debt management solution.
Scotland’s laws and practices in this context are distinct from those in England and Wales and they have been adjusted in a number of important ways over the past decade. The changes though appear to be having the desired effect, with the rate of insolvencies across Scotland having fallen significantly in recent years.
Personal insolvency
In Scotland, the options open to debtors who cannot afford to pay off whatever amounts they owe to their creditors include sequestration and Protected Trust Deeds. Both are legally recognised as being formal insolvency processes, with sequestration essentially the equivalent of bankruptcy in other parts of the UK.
Scottish Trust Deeds are an important part of the equation too for many debtors because they provide some measure of protection from creditors to individuals whose financial problems have spiralled out of control. And affording greater protections to potentially vulnerable Scots who are heavily indebted has been a key aim of legislation introduced as of April 2015.
The Bankruptcy and Debt Advice (Scotland) Act 2014, otherwise known as the BADAS legislation, affords debtors who are declaring themselves insolvent a six-week window in which they are protected from legal action by creditors. The idea behind this moratorium is to give heavily indebted individuals a chance to seek the advice they need in finding routes towards a brighter and more stable financial future.
Assessing assets and making repayments
The latest laws impacting insolvency also have a bearing on the timeframes involved when individuals look to repay their debts to creditors over an extended period. So, where previously any assets acquired by a recently-insolvent individual would be taken into consideration by associated proceedings for up to three years, that timeframe is now extended to four years.
The BADAS laws also insist that contributions being made to repay creditors as part of a sequestration, Trust Deed or Debt Arrangement Scheme by a debtor should be assessed on the same basis across the board. Contributions to that end can, as a result of the new laws, be made directly from the wage packets of employed but insolvent individuals in Scotland.
Debt Arrangement Schemes and low income options
Underlying the latest legislation around insolvency in Scotland are the existing laws that offer indebted individuals the option of entering into Debt Arrangement Schemes (DAS) with their creditors. These are designed as mechanisms that formalise agreements between debtors and creditors in ways that mean consumers aren’t forced into the position of declaring insolvency or entering sequestration. Instead, debtors can look to halt the decline of their financial situation and pay off debts over time and in full without the added pressure of threats and demand from creditors.
Other recent rule changes in Scotland have opened up an alternative route to sequestration for individuals whose assets and incomes are particularly low. These low asset and low income (LILA) sequestration solutions are already helping hundreds of struggling Scots overcome their debt problems more effectively than they otherwise might, having been introduced in 2008.
Continued improvements
The very latest laws affecting insolvency scenarios in Scotland came into effect in April and the hope is generally that they will help reinforce positive trends regarding serious debt problems across the country. The latest figures from the Accountant in Bankruptcy show steep declines in the number of Scots entering insolvency but thousands still face nightmare situations every month and they continue to need the right help from relevant experts in order to make the right choices for the future.
John Baird is a personal finance and insolvency expert from Scotland Debt Solutions. He specialises in advising people on how to manage their money and deal with their personal debt problems.
