If you’re a homeowner in Scotland, and are experiencing high levels of debt, your property may be affected when you enter a formal debt relief procedure. This doesn’t necessarily mean you’ll need to sell your home, however – you may be able to remortgage to provide additional funds for your creditors.
If you have a regular monthly income, you may qualify for a remortgage despite your poor credit history. Here we look at the three main debt relief solutions in Scotland, and the likelihood of a remortgage being required.
When you’ve already taken out a mortgage on your home, or you own it outright, it’s likely your trustee will require you to release equity at the end of the trust deed term – generally four years.
As long as there’s sufficient equity available to make the transaction worthwhile, the money will be used to repay your creditors. Otherwise, you’ll have to extend the trust deed term by a further 12 months.
When you’re sequestrated, your assets pass to the trustee who must sell them to achieve the highest possible return for creditors. In the case of your home, the trustee generally aims to help you stay there if possible.
Being in sequestration severely limits your ability to obtain any form of borrowing, but if the property is jointly-owned, the joint owner may be in a position to remortgage in their sole name, effectively purchasing your share of the property.
In some cases, family or friends may wish to invest in property, and be able to buy you out with a view to renting it back to you. They receive an income from their investment, and you can continue to live in the property.
The Debt Arrangement Scheme differs from sequestration and Scottish trust deeds in that you repay your debts in full, but over a longer term. Although DAS doesn’t involve formal insolvency, the procedure does negatively affect your credit rating.
So if you decide to remortgage, any current remortgage deals will be out of reach. There are lenders who specialise in remortgages for people with bad credit, however. This generally involves paying a higher rate of interest, or agreeing to other generally unfavourable terms when compared with a ‘standard’ remortgage.
Scotland Debt Solutions can provide further advice on remortgaging whilst in a trust deed, sequestration, or DAS. We work from five offices around Scotland, and will arrange a free same-day meeting to discuss your situation.
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Sequestration typically lasts for a period of 12 months, although if you’re also paying a Debtor Contribution Order (DCO), repayments can continue for a further three years after discharge.
Our Scottish based team can help advise you on your debt problems.