How Does The Scottish Debt System Compare To The Rest Of The UK?

In the UK the Scottish system for dealing with debt is frequently held up as the ideal. With the English and Welsh equivalent straggling behind and the insolvency services offered to residents of Ireland looking absolutely abysmal in comparison. So exactly what does the Scottish system offer and what can other countries learn from their system at a time of high insolvencies and mounting debts?

Two of the key principles which make Scotland a preferable place to be a debtor are variety and accessibility. There is a lot of knowledge out there which makes Scottish residents some of the most clued up in the world when it comes to handling insolvency. There is also a wide range of potential routes out of debt for those in Scotland which allows people from all walks of life to find the right debt solution which will work most effectively for them. England and Wales have many comparable insolvency solutions, yet these are more costly to access and less widely known about.

Many governments fear that the more lenient, accessible and affordable debt solutions are, the more likely it is that their residents will get into debt by failing to acknowledge the severity of the problem. By making it easier to escape debt, many governments worry that they will encourage financial irresponsibility and see higher levels of insolvency which could be disastrous in the present economic climate.

If the Scottish system has shown us anything, it’s that this is not the case. Nobody want to fall into debt, but understanding how to escape it and having easy access to debt solutions ensures that, if you do, the situation does not spiral out of control. Scottish debtors get help earlier and halt the cycle of insolvency sooner – preventing even worse debt accruing. Let’s take a look at a few of the available Scottish debt solutions to find out more:

Low Income Low Asset (LILA)
For debtors with low income and low assets, LILA is designed to help. It is designed to assist those who earn no more than the standard national minimum wage for a full 40 hour working week and have assets totaling no more than £10,000. This system allows those with debt to access bankruptcy when they cannot afford a conventional route into bankruptcy – halting the debt spiral.

Trust Deeds
This form of insolvency is similar to the English and Welsh IVA (Individual Voluntary Arrangement) system. In contrast, however, a trust deed typically lasts 36 months or less whilst an IVA can last a minimum of three years.

It is a widely publicized and popular form of insolvency Scotland which helps many hundreds of people to regain control of their finances by providing mediated agreements between creditors and debtors in which a qualified insolvency practitioner acting as a trustee distributes the creditors relevant assets and a proportion of income over a set period to repay an agreed upon percentage of the debt.

Certificate for Sequestration
Introduced in 2010, this is a relatively new route into bankruptcy which is much cheaper and more accessible for those in debt. It must be issued by an “authorized person” but there is no charge for this service. It was designed to fill the gap which many debtors who were unable to access other forms of debt relief fell into, thus providing a set of measures which would allow access for the vast majority of the population. 

Debt Arrangement Scheme (DAS)
This is a scheme run by the government which provides debtors with more time in which to repay their debts – free from hassle and the threat of court action. This is done by freezing interest, charges and fees on debts. Once the scheme is complete debts are written off.

The Bigger Picture
As of 2012 Scotland has the highest rate of bankruptcy in the UK, yet this does not necessarily point to a negative system of debt management. In fact, whilst these figures point to a high level of insolvency and debt in the country, they also point to a very usable system of insolvency management which is understood and accessible to a far bigger majority. Greater country-wide understanding of the options available to those in debt can only be a positive thing which will help more people work their way out of debt faster and earlier than in the rest of the UK.

Simon Wyllie is an associate of Trust-Deed.co.uk, a trust deed forum offering professional insolvency support for debtors in Scotland.

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