Can debt affect my home in Scotland?

When you're struggling with debt, one of your biggest concerns is likely whether you could lose your home. This fear is completely understandable, and the good news is that while debt can potentially affect your home, there are protections in place and steps you can take to protect your property.

When might my home be at risk due to debt?

As a homeowner, your property can be at risk in certain circumstances, but it's important to understand that lenders and creditors can't simply take your home without following proper legal procedures.

Your mortgage is what's known as a ‘secured debt’ because it's secured against your property, which means your mortgage lender does have the right to repossess your home if you fall significantly behind on payments. However, repossession is typically a last resort. Mortgage lenders are regulated by the Financial Conduct Authority, which requires them to explore all other options before considering repossession.

How your home is affected in debt management solutions

Several debt solutions can help you manage your debts while protecting your home:

• Trust Deeds – A Trust Deed is a formal agreement that allows you to repay a portion of your debts over four years. Any unaffordable unsecured debt will be written off. Your home is generally protected under a Trust Deed, although you may need to attempt to release equity in the final year. An alternative to releasing equity may be to extend the term of the Trust Deed by a further 12 months.
• Debt Arrangement Schemes – A Debt Arrangement Scheme (DAS) is a government-backed debt solution only available in Scotland. With a DAS all interest and charges on your debt will be frozen, and you will then make a series of regular monthly payments towards clearing what you owe. No debt will be written off as part of the DAS, however, you will be given an extended time to pay back what you owe.

Can debt affect my home if I rent?

If you rent your home, your situation is generally more secure when it comes to debt solutions. Most debt solutions won't directly affect your tenancy, though entering into sequestration could potentially breach your rental agreement so you should check your tenancy agreement for specific clauses.

When seeking debt advice as a renter, professionals will typically seek confirmation from your landlord that any formal debt solution won't affect your tenancy. You should be aware that some debt solutions might affect your ability to rent in the future, potentially requiring higher deposits or guarantors.

If some of your debt is owed to your landlord in the form of rent arrears, this does not necessarily mean that you will face eviction, however, you should make it a priority to speak to your landlord about your situation and explain the steps you are taking to resolve the situation, such as seeking expert debt help.

How Scotland Debt can help

If you're worried about how debt might affect your home, don't wait until the situation becomes critical. Professional debt advice can help you understand your options and choose the best solution for your circumstances. At Scotland Debt, our team of expert debt advisors are here to help you understand your options and plan a route forward. Contact the team today to take the first step.