Debt Advice Guide

• There are many advice agencies in the charitable sector, or debt advisers working from local authority outlets across Scotland, who can provide an excellent source of free, impartial advice about your options. You can search for the services closest to you via the MoneyHelper
• Insolvency practitioner firms can also advise you and are likely to be particularly useful if you think a Protected Trust Deed may be your preferred route, as only an insolvency practitioner (IP) can set up and administer this solution for you. Whilst IP firms can provide advice without needing to be authorised by the Financial Conduct Authority (FCA), we would recommend finding one that is, otherwise they would not be able to set up other non-insolvency solutions such as DAS, which may actually be more suitable for you depending on your circumstances. (NB All of the firms represented by the experts on this site have FCA authorisation).
• Steer clear of firms that may not be authorised to give debt advice yet push particular solutions (usually Trust Deeds/IVAs) before they even know anything about your situation. The process should always be about understanding your financial and household circumstances first and then presenting you with all suitable options and explaining what is involved with each, so that you can choose for yourself which you prefer.

• A good debt adviser/IP will need to understand your situation fully, so it is useful if you can pull some information together before speaking with them. In particular:
  • a list of how much you owe and to whom
  • details of your household’s typical monthly living costs
• Think about how you expect your situation may change over the next few years, as this may affect what the best route is for you. For example:
  • how likely is your income to change significantly?
  • is there an increase/decrease expected in your outgoings at some point (eg mortgage payment increases, end of car finance term, child no longer dependant etc)
• Consider what is most important to you and therefore what questions you want to make sure you ask (eg effect on your home/car etc)

Despite all formal debt solutions being governed by a set of rules laid down in legislation, insolvency practitioners still have a fair amount of discretion in the decisions they make when dealing with cases. It is worth asking certain questions beforehand to find out how they would deal with potential situations, for example:

What happens if my circumstances change?

• We hear many reports on the forum of people who have experienced problems after a change in circumstances when in a solution such as a Protected Trust Deed. You should only ever have to pay what is reasonably affordable, however it seems some Trustees are very resistant to allowing reductions in monthly payments if needed and choose to terminate the Trust Deed instead if the initial payment level cannot be maintained, meaning you may effectively be back at square one. This should not be necessary and runs contrary to official guidance when such changes are out of your control.
• When faced with this problem, some Trustees will agree to reduce payments but will instead insist on the term of the Trust Deed being extended to compensate for this. Again, this extension may not be necessary and it may be wise to avoid IPs with this policy in favour of one with a more enlightened view.

What is the effect on my home/car etc?

• For insolvency solutions such as a Trust Deed, you need to be careful that you are not putting your assets at more risk than is necessary. An agreement should be made clear prior to you signing up to anything as to how such things will be taken account of and kept safe.
• The policies of insolvency firms can vary a lot when it comes to dealing with equity in a home. Most will try to come to a practicable solution that creditors are likely to accept which will mean that your home can be safeguarded. This typically involves an extension to the term of the Trust Deed and/or payments from a third party such as a family member. Some may insist that a remortgage be attempted in order to release funds. How long the extension may be or how much may be needed to be paid in can vary a lot depending upon the insolvency practitioner’s view.

How long will it take for me to be discharged?

• Your discharge from a Scottish Trust Deed should happen quite quickly once you have met all of your obligations. However, according to the experiences of many of our forum members, some firms will routinely take many months before they arrange this. Whilst this may seem a long way off at this stage, it is worth asking the question, as it could otherwise be an agonising wait to celebrate your discharge at the end if your chosen firm is one of these.

Look out for warning signs

It has unfortunately been a persistent problem in this sector that some firms that purport to be offering debt advice are in fact more interested in pushing you towards a particular solution (often a Protected Trust Deed) primarily for their own commercial reasons. You may be wise to be on the look out for the following warning signs and seek advice elsewhere instead if they crop up:

It feels like you are being sold to

As sophisticated consumers our instincts are often well-honed to spot when you are being sold to, so it may not be a bad idea to trust that gut feeling. If it doesn’t feel right then why not get a second opinion elsewhere? It should feel like the adviser is seeking to understand your situation fully and then presenting the options for you in a balanced way.

You are being rushed into signing up

It is a big decision to go ahead with a formal debt solution and there is usually no reason to rush into anything, despite the temptation to do so if you are desperate to move forward. Take a few days at least to let things sink in so that any questions you have can surface. It is important to make sure you understand what you are entering into, what the alternatives are and crucially that it is based on an affordable budget that won’t just fall apart and leave you in an even worse place. If an adviser is pushing hard to get your signature on the dotted line then maybe it is a good reason to push back and get a second opinion from elsewhere.

Only one option explained

Most people have more than one route that could work for them, so if an adviser is only presenting one solution then consider looking elsewhere. Even if other solutions are not as attractive, they should still be explained to you so that you know wat you are choosing between.

You are being told to make statements that are not true

A big no-no, and something that may well see you end up with a much bigger problem in due course. Get advice elsewhere instead.

Budget does not cover all expenses

it is paramount that your chosen solution is affordable to you, otherwise you are merely replacing one problem with another. An unscrupulous adviser may seek to make your budget “fit” so that the payments look affordable on paper – but remember it is you that has to actually manage that budget in practice. (NB There are statutory guidelines as to what is reasonable expenditure depending on family size, so there is a chance that your outgoings may be having to be cut back to comply with this. It is worth getting a second opinion from a reputable agency/firm to check whether this is the case for you)

Partner’s situation not taken into account

A regular problem we see is that a person’s finances are assessed simply as an individual, even if they live as part of a couple. A good debt adviser will look to get information about your finances as a household where possible, in order to make sure that they are giving best advice for your situation and avoiding unintended consequences for your partner. For example, if you enter an insolvency process like a Trust Deed or Bankruptcy it does not affect your partner’s liability for joint debts so they could just face a bill for the whole amount of that debt instead.

Please do not hesitate to contact us for confidential advice about your debt solution options tailored to your particular circumstances.  Our friendly expert advisers are happy to assist you to find your preferred way forward ,or can be a valuable second opinion for you to check that the advice you have received elsewhere is sound.

You can also ask questions anonymously in our forum if you prefer.