Frequently asked questions about debt (FAQ)

No. A Debt Management Plan is a way of helping you make affordable payments to your existing creditors. The Debt Advisor Ltd cannot provide you with a loan.

Firstly we accurately assess your circumstances and make a provision for priority debts. If we establish that you cannot afford to meet minimum contractual payments, we will advise you on all appropriate options. If the debt management plan is the most suitable solution we will negotiate and agree a payment plan with your creditors. You will make one monthly affordable payment which we will distribute to creditors on your behalf on a “pro-rata” basis.

We have a dedicated team of debt advisors who will be there to aid and assist you through your debt management plan.

There are debts which are regarded as “priority” debts which include your mortgage, rent, utilities and council tax. You will continue to pay these each month and if there are arrears to priority creditors, we will make sure that your plan includes payments to clear the arrears. You can then increase your payment into your DM plan when your arrears are cleared.

Creditors and lenders do not have to accept our proposals. In our experience, the majority of our debt management plans are accepted by creditors and they do not resort to action. All you need to remember is to let us know immediately of any threatening calls or letters, or any legal documentation so we can guide you and help you take action appropriately.  If it becomes apparent that creditors are looking to take action, it may be appropriate to consider a formal debt solution such as an IVA or bankruptcy.

This is possible; however, the payments will be affordable every month. The creditors are not obliged to accept your offer of repayment through this plan or freeze interest and charges, and if they do not, it may take longer and cost more for you to repay the creditors in full due to the possibility of additional fees and charges.

It is highly likely that your creditors would withdraw their support of the plan and may commence legal proceedings.

A DMP is an informal solution so there is no legal obligation on creditors to stop contact or freeze interest and changes, however in the vast majority of cases, we manage to achieve this with them.

You can if you wish; however, there are a few factors to consider. Dealing with your creditors can be a time consuming and stressful process, which requires you to maintain regular contact with them, therefore the service that we provide takes this pressure away from you. We are here to ensure your solution is appropriate for you and managed effectively, up until your debts have been cleared or an alternative solution becomes more appropriate for you.

You are paying for a professional service and employing our skill and expertise. The set up fee you pay covers the work we undertake to set up your plan, which includes drafting your debt management plan, sending this out to creditors, liaising with creditors to gain their acceptance to the plan and dealing with creditor’s queries.  The management fee covers the following: conducting 6 monthly reviews, a dedicated team of advisors to help you with any queries, handling any letters or emails you may receive, ongoing negotiations with your creditors to ensure your plan runs smoothly, handling letters, e-mails and phone calls from your creditors, distributing your monthly payment to your creditors, assistance with legal action that may be taken by your creditors, and our Customer Portal available to you 

There is a 14 day “cooling off” period from the date you accept The Agreement Terms. If you decide to not continue with the plan within the first 14 days, we will refund your payment, unless a distribution has already been made to your creditors.

We review your plan every 6 months and take into account any changes in your circumstances. If your situation changes in any way, we would ask you to contact us immediately. If your situation has worsened we will write to your creditors to negotiate a new affordable repayment plan, or discuss an alternative solution with you.

Each plan is individual to each customer’s financial circumstances. Due to the fact you are paying less than the original contracted payment to each creditor, the term to repay the debt will be longer but the repayments are more affordable.

You may have to pay £50 to apply for a variation order. This is a charge levied by the court none of which is retained by The Debt Advisor Ltd.

If you are already in employment, your employer may decide to perform a credit check. This could reveal that you currently have an arrangement with your creditors; generally, it is unlikely to affect your employment.

If you are seeking new employment, there are some organisations that perform a credit check as part of the recruitment process to establish whether or not you are having financial difficulties. This check will not necessarily affect your chances of employment.

Employers must obtain your permission to perform a credit check.

All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term. 

The Insolvency Service website has helpful information at https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty.

There are sources of free debt advice and services. You can find out more by contacting the Money Helper Website.

You will receive an automatic discharge within 12 months from the date you are declared bankrupt. That is unless your discharge is suspended because you have not cooperated with the person administering the bankruptcy – the Trustee.

However, if you are felt to have accrued the debt culpably, recklessly or dishonestly then you may be subject to a Bankruptcy Restriction Order (BRO) for between 2-15 years.

During the time in which you are bankrupt and in which any BRO’s apply, you are prohibited from being a director of a company. Also, if you are self employed, then you cannot trade in any other name apart from your own and you cannot apply for credit for more than £500 without declaring your bankrupt status. There may also be some restrictions imposed on your profession, especially if your job involves working with money or holding a professional licence.

If you feel as though Bankruptcy is the only option and you would like us to assist you, we charge £500 +VAT for assistance in preparing the debtors petition paperwork and £600 +VAT if you have a pending charging order.

If you are deemed to have a surplus income, after providing for the reasonable cost of living, then you will be asked to make a contribution towards the bankruptcy for a period of three years. Contrary to what many people think, you are allowed enough money to pay for your reasonable living costs. By completing our debt calculator you will be able to calculate your surplus after providing for living costs.

Personal possessions of a reasonable nature are excluded from bankruptcy; these include your household possessions and tools of the trade which usually includes your car if you can demonstrate that you need the car to get to work. The Trustee is entitled to ask you to downgrade an item if they feel it is extravagant and introduce funds raised into your bankruptcy. For example if you have a car on hire purchase, which is judged to be too expensive and consequently affects the amount your creditors would receive, then you will be asked to trade it in for a cheaper vehicle.

Assets which have value including your equity in any property, in excess of £1,000, will have to be realised to pay creditors. The money is generally raised either through remortgaging the property, or if that is not possible, by selling the property. If the amount you need to raise is relatively small, it is always worth considering if family can help you raise the necessary sums to prevent the sale of the property.

Bankruptcy is binding on all creditors including credit card debt, utilities charges , council tax, Revenue debts including overpaid benefits, VAT, Self Assessment Tax or PAYE/NIC plus shortfalls on the sale of property. Matrimonial, criminal and student debt do, however, survive bankruptcy and remain your responsibility after discharge.

Bankruptcy will remain on your credit records for a period of 6 years. Once you receive your discharge it will be recorded on your credit profile; this may not be done automatically therefore it is beneficial to ensure your credit file is always kept up to date. During the time you are bankrupt you are prohibited from obtaining credit for more than £500 without declaring your bankrupt status.

With bankruptcy on your credit record, it is likely to affect your ability to obtain credit, bank accounts with a cheque card and possibly even certain types of employment.

Once it is off your record then you can start to rebuild your credit, for example by obtaining a small overdraft facility and making sure you do not exceed your limit. If you established a reliable record with your bank, and you do need additional finance, the bank may be prepared to consider a loan.

Once you have begun to rebuild your credit you should be able to apply for prime rates again and then transfer balances from the sub-prime lenders you have been using.

When you are made bankrupt your existing bank will be informed and your account may be frozen. It is worth approaching your Trustee to obtain his/her permission to unfreeze your bank account especially if you have no other bank account into which you can pay your wages. We recommend that prior to submitting your petition, you draw sufficient monies out of your account to cover your monthly outgoings for at least 1 month. There is no restriction on operating a bank account but you will not be allowed an overdraft facility, cheque book and or even a debit card. For help finding a bank that will open an account, see the Basic Bank Account Matrix.

All debt solutions should be very carefully considered particularly Bankruptcy. There are other solutions which could be appropriate including IVA, Debt Management, Debt Relief Order, Dealing Direct with your Creditors. If you live in Scotland, please do visit our information on Scottish Solutions.

Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. For further information on fees, please see the FAQ section of the different solutions available. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term. Calls to our free phone number from mobile phones and other networks may be charged.

The Insolvency Service website has helpful information at https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty.

There are sources of free debt advice and services. You can find out more by contacting the Money Helper Website or 0800 138 7777.

It is a legal order which confirms to your creditors you are unable to repay the money you have borrowed.  It involves you agreeing to pay what you can afford for 48 months and your Trustee gathering in your assets which are not excluded.  These assets are turned into cash to cover the costs of bankruptcy and your debts.

Provided you co-operate fully, your discharge at the end of one year. However, you will be required to make monthly contributions payments for a further period of three years.

You are unable to include your Student Loan if it is covered by the Education (Scotland) Act 1980 c.44.

You need to be able to demonstrates you are unable to pay your debts as they become due. There is no charge to obtain this certificate.

Most money advisers, insolvency practitioners and some people who work for insolvency practitioners are authorised to issue this certificate.

Minimal Asset Process (MAP)

This is a process available for people with little assets. You must;

• Owe at least £1,500
• Owe no more than £25,000
• You do not own a single asset worth more than £1,000
• You live in Scotland or have lived in Scotland for the last year
• Not been bankrupt through the Minimal Asset Process in the last 10 years
• Be only receiving benefits or you have no surplus income which has been assessed by a money adviser

The process and the cost for both solutions can be viewed in our Scottish Solutions Bankruptcy Also called Sequestration section

If you are given money as a gift, you must inform your Trustee.  Depending on the amount your Trustee may require you to make this available for your creditors.  You must also inform your Trustee of any changes to your income.

There are some banks that will provide a basic bank account service and your Trustee can provide details. However certain banks will not allow individuals to maintain an existing account after sequestration, even if you do not owe them money.  In some cases, if you have a joint account in which one party has been declared bankrupt, the bank may insist on that account being closed, and both parties opening a new account.

All debt solutions should be very carefully considered.  If you are based in Scotland, struggling with debt issues and need advice on your options, we are happy to refer you to appropriately regulated debt solutions practices who can offer advice on all solutions.

There are sources of free debt advice and services. You can find out more by contacting the Money Helper Website or 0800 138 7777.

DAS is a government managed solution which allows you to repay your debts through a debt payment programme (DPP). The DPP will allow you to pay off your debts over an extended period of time while giving you protection from your creditors taking action against you to recover the debt in the DPP.

The DPP can last for any reasonable length of time and, if approved, will freeze all interest and charges on the debt included, resulting in them being waived if you fully complete the DPP.

To be able to participate in a DAS you need one or more debts and meet the following criteria:-

• Be habitually living in Scotland
• Want to repay your debt without the threat of creditors taking action
• Have a reasonable level of surplus income after deducting your reasonable household living costs

You must continue to meet your other commitments such as mortgage payments, rent and utility bills during the duration of the DPP. The DPP makes a pro-rata offer of payment to creditors. When the DPP is completed, creditors will have received at least 90% of the debt they are due.

When the DPP is completed, creditors will have received at least 90% of the debt they are due.

You are not able to apply if you are in a Protected Trust Deed, are bankrupt or are subject to a bankruptcy order.

To access a DAS scheme you need to seek advice and assistance from a DAS approved money advisor.  The Debt Advisor do not offer the DAS, however we work alongside regulated companies that can offer advice on all appropriate solutions.

If your circumstances change in any way, and you are struggle to meet your monthly contributions, get in touch with your  Money Advisor who can assess your situation. They may take the decision to apply, on your behalf, to the DAS Administrator for a payment holiday or a variation to reduce the level of your payments, depending on the severity of your circumstances.

As long as your missed payment is as a result of an agreed payment holiday, then, subject to certain conditions, your creditors are still prevented from taking legal action against you.

DAS will have a negative impact on your credit rating until debts have been satisfied.

All debt solutions should be very carefully considered.  If you are based in Scotland, struggling with debt issues and need advice on your options, we are happy to refer you to appropriately regulated debt solutions practices who can offer advice on all solutions.

There are sources of free debt advice and services. You can find out more by contacting the Money Helper (Scotland) on 0800 138 7777 or by visiting their website.

The criteria for a Trust Deed includes:-

• You live in Scotland or you have lived there in the past year
• Demonstrate you cannot afford to pay your debts in a reasonable period of time
• You must have unsecured debts of at least £5,000 for a Trust Deed to become protected

A Trust Deed may be an ideal solution if you have unsecured debts of more than £5,000. It can be used for unsecured debts including bank loans and overdrafts, store and credit cards, credit union and payday loans.

Mortgages, secured loans or hire purchase debt cannot be included in a Trust Deed as the debt is secured against that asset.

The fees charged by your Trustee should be explained to you upfront.  Creditors voting on trust deeds will frequently cap the level of fees that your Trustee can charge. The fees come out of your contribution and after deduction of fees and expenses, creditors will get the balance.

No. A Trust Deed is a private and confidential matter between an individual, their Trustee and their creditors.  However, before entering any debt solution please check your contract of employment as you may be in breach of your contract if you enter into a Trust Deed.

If you have a property and there is equity in the property, your trust deed will normally require that your share of equity is paid into your arrangement. This can be done by remortgaging your property or for a 3^rd party sum to be paid on your behalf. The value of your equity (the difference between the value of the property and the amount you owe to the secured lender(s)) is determined at the start of the Trust Deed.

When you sign a trust deed your trustee will:

• advertise your trust deed in the ‘Edinburgh Gazette’. The ‘Edinburgh Gazette’ is a newspaper used by the credit industry. This means that your trust deed will come to the notice of organisations like banks and credit reference agencies;
• write to all your creditors and ask them to agree to your trust deed; and
• if a sufficient proportion of your creditors agree to your trust deed, your trustee will send a copy of it to the Accountant in Bankruptcy.

The Accountant in Bankruptcy will record your trust deed in the Register of Insolvencies. The Register of Insolvencies is a public record. Once your trust deed is protected your creditors can no longer take legal action to recover their debts.

Your trust deed will become protected if a sufficient proportion of creditors agree to it. You need agreement from at least half of your creditors and the creditors who agree must be owed at least one third of your total debt. Creditors who do not reply to your trustee within 5 weeks of the date of the advert in the ‘Edinburgh Gazette’ are treated as if they had agreed.

If your creditors object and your trust deed does not become protected, they can take you to court to get back the money that you owe to them. They can ask the court to make you bankrupt.

They can only ask the court to make you bankrupt if they can prove that bankruptcy would be a fairer deal for them. However, this is unlikely because the trustee of a trust deed deals with contributions and assets in just the same way as they would in bankruptcy.

No.  A Trust Deed must be arranged by a licensed Insolvency Practitioner.

Your credit rating will be affected for 6 years from the date your Protected Trust Deed “PTD” is approved. You cannot borrow more than £500 whilst you are in a PTD without notifying your creditors you are in a PTD. Before you borrow anything, you should discuss this with your trustee.

All debt solutions should be very carefully considered.  If you are based in Scotland, struggling with debt issues and need advice on your options, we are happy to refer you to appropriately regulated debt solutions practices who can offer advice on all solutions.

There are sources of free debt advice and services. You can find out more by contacting the Money Helper (Scotland) on 0800 138 7777 or by visiting their website.