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

If you cannot pay your debts in full over an extended period of time, you may be able to legally write off some or all of them using the options below.

Formal debt solutions such as these require guidance from a recognised money advisor prior to taking them up – this may be from a charity or a licensed Insolvency Practitioner, for example. The options below also need to be administered by a Trustee.

The type and level of your debt will dictate which of these options is most suitable in your circumstances.

Trust Deeds

Trust Deeds allow you to write off a proportion of your debt after a specific period of time. This is agreed when the Trust Deed is set up. You need the help of a registered money advisor or Insolvency Practitioner to negotiate with your creditors regarding the monthly amount to be paid.

Trust Deeds are generally used for unsecured loans such as credit card debt, bank overdrafts or utility arrears. Your assets pass into the hands of a Trustee, who administers the Deed and distributes payment among your creditors.

Set-up charges for this option vary from around £3,000 to £5,000, and these are deducted from your monthly payments.

Trust Deeds generally last for 3-4 years, after which time your remaining debt will be written off. Your Trust Deed becomes protected if after 5 weeks’ of being advertised in the Register of Insolvencies, your creditors do not object.

A Protected Trust Deed means that creditors can no longer take legal action against you to recover their debt as long as you make the payments stipulated.

Bankruptcy

Bankruptcy is usually an option of last resort, and one which allows you to write off most of your debts. Once bankrupt, your assets pass into the hands of a Trustee who may sell them to realise money to pay creditors.

There are three ways to enter bankruptcy:

• your creditor can make you bankrupt if you have unsecured debts of £3,000 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 and have few assets, you may be able to use the Minimal Asset Process, or MAP bankruptcy

Bankruptcy generally lasts for one year (apart from MAP bankruptcy which may be six months), after which time you will be able to start rebuilding your credit file.

Offer in final settlement

In certain circumstances your creditor may agree to write off your debts, either in part or in full. If you are suffering from serious illness, for example, and there is no hope of repaying the amounts owed, they might be persuaded to take no further action.

You will need to provide proof of your situation, however, and it is advisable to seek professional guidance from a registered money advisor or licensed Insolvency Practitioner. You should make sure that any agreement from creditors is confirmed in writing.

Scotland Debt Solutions have offices throughout Scotland, and have a long track record of successfully guiding people out of debt.