I want to write off my debts as a Scottish resident, is this possible?

Can I get my debts written off?

If you cannot pay your debts, you may be able to legally write off some or all of them using the following options:

• Enter into a Trust Deed and make an affordable monthly contribution to your debts. After the Trust Deed ends, the remaining debt is written off
• You may be able to write off unaffordable debt via sequestration (bankruptcy)
• Full or partial write off of your debts through a final settlement agreement with creditors

Formal debt solutions such as Trust Deeds and Sequestration require guidance from a registered money advisor prior to entering into them – you can get this advice from a charity or a licensed insolvency practitioner.

Whether you are able to negotiate debt write off with your lenders will depend on a number of factors including the level of debt you have and your ability to repay this amount either in full or in part. If you cannot repay the money you owe, you may be able to convince your creditors that writing off your debt is the best option for all concerned.

Your Scotland Debt Solutions advisor will be able to advise whether debt write off, using one of the below solutions, is a possible option for you.

Can a Trust Deed help me write off debts?

A Trust Deed functions as a formal payment plan voluntarily entered into with your creditors. A Trust Deed will typically run for 48 months during which time you will need to make a monthly contribution towards your debts. This amount will be carefully calculated and must be affordable to you. Once the Trust Deed ends, the remaining debt will be written off.

When in a Trust Deed, creditors can no longer take legal action against you to recover their debt as long as you make the payments agreed. Any debt written off at the end of the Trust Deed cannot be chased and you will not need to make any further contribution towards it.

You will need the help of a registered money advisor or Insolvency Practitioner in order to enter into a Trust Deed. They will negotiate with your creditors regarding the monthly amount to be paid, and they will also be responsible for collecting your monthly payment and distributing this among your creditors.

Can I write off my debts using sequestration (Bankruptcy)?

Sequestration is the Scottish form of bankruptcy, and while usually an option of last resort, it does allow you to write off most of your debts. Once you have entered into the sequestration process, any assets you own pass into the hands of a Trustee who may sell them in order to raise money to pay off the debts you have. 

There are three ways to enter bankruptcy:

• your creditor can make you bankrupt if you have unsecured debts of £5,000 or more
• you can make yourself bankrupt by applying to the Accountant in Bankruptcy (Scotland’s Insolvency Service)
• if you owe more than £1,500 but less than £25,000, have few assets, and are not a homeowner, you may be able to use the Minimal Asset Process, or MAP bankruptcy as an alternative

Sequestration generally lasts for one year (apart from the MAP route which typically lasts six months), and the majority of your unsecured debts will be written off as part of the process. Some debts such as student loans and court fines will not be written off so you will need to make alternative arrangements to pay these.

Can I get debt written off with an offer in final settlement?

In certain circumstances your creditor may agree to write off your debts, either in part or in full, without you having to enter into a formal insolvency process. If you are suffering from serious illness, for example, and there is no hope of you being able to repay the amounts owed, they might be persuaded to take no further action and write off what is left via a debt settlement offer.

In order for debt write off to be considered, you will need to provide proof of your situation, and demonstrate that you simply have no way of repaying the money you owe. You should make sure that any debt write off agreement via a full and final settlement from creditors is confirmed in writing and ensure you retain this in a safe place. 

Scotland Debt Solutions have offices throughout Scotland, and have a wealth of experience guiding people out of debt. For more information on whether you could legally write off some or all of your debts, call our team today.