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Debt Solutions

When people struggle to meet their financial obligations they will get into debt but when that debt becomes unmanageable it may require one of these debt solutions.

Some debt solutions are only available to people living in Scotland while other solutions are for people living in the rest of the UK.

Wrongly entering some debt solutions can make a financial problem worse and have severe consequences so it’s important to fully understand each solution.

All debt solutions can only be used for unsecured debts because any secured debts should be dealt with as a priority and payments should be maintained. If it’s not possible to maintain payments to a secured debt the goods must be repossessed and resold, allowing the shortfall to be added to a debt solution.

Debt Management Plan

A debt management plan is simply an informal arrangement to repay the debt over period of time which is different from the original agreement.

People can setup their own debt management plan by negotiating with creditors or they can have an organisation do it on their behalf.

Some debt management companies will run the solution for a monthly fee however it’s best to speak with a free organisation as it’ll clear the debt sooner.

The debt management plan doesn’t guarantee to freeze interest or charges and creditors can still take legal action despite payments being made.

There are two scenarios where a debt management plan is likely to be the best debt solution, either when someone can repay their debt or as a holding solution.

Debt Arrangement Scheme

People in Scotland can enter a debt management plan but a debt arrangement scheme is similar except it is a formal arrangement which can’t be changed.

The DAS will also freeze interest and charges so people will know when they are going to be debt free so long as they continue to make payments.

Anyone living in Scotland can enter a debt arrangement scheme by contacting a free money adviser who will complete the necessary forms.


If a debt management plan is set to last too long (5 years or more) an individual voluntary arrangement (IVA) could be the right solution.

The IVA allows people to propose a monthly contribution to their creditors which will last 5 years and any debt remaining at the end is written off.

The IVA is a legally binding arrangement which means creditors can’t take further action once it’s begins but the contributions must continue.

There is some criteria which people considering an IVA must meet and wrongly entering this debt solution can have serious financial consequences.

IVA Criteria

  • Must have at least £150 disposable income
  • Must live in England, Wales or Northern Ireland
  • Debt should be above £10k (although this can vary depending on disposable income)

If someone comes into additional money while in the IVA they could be made to pay it towards the debt solution and even fees if there’s sufficient funds.

This can mean people pay back more than the total debt so should be considered if someone expects to receive large funds within the IVA period.

Protected Trust Deed

A protected trust deed is a Scottish debt solution which is similar to an IVA but has some key differences such as criteria to enter it.

People entering a protected trust deed will make one monthly contribution to their creditors over 4 years with any outstanding debt written off.

The protected trust deed is also a formal, legally binding agreement which protects people who enter it from further action being taken. The interest and charges will be frozen once it officially begins.

Protected Trust Deed Criteria

  • Must have minimum £100 disposable
  • Debt must be at least £8k
  • All assets must be realised before entering

During the period of the protected trust deed any additional money someone comes into will be used to pay the debts and trust deed fees.


In England, Wales and Northern Ireland the final debt solution someone should consider when all others aren’t suitable is bankruptcy.

When someone enters bankruptcy they are making a statement that they are unable to repay the outstanding debt or enter another solution.

Once someone has been declared bankrupt an official receiver is appointed to manage the debt solution and recoup money for the creditors.

If someone is working or another source of income the official receiver may decide to implement an income payment for up to 3 years.

So it’s easier for people to deal with their debt there are three routes into bankruptcy and each have there own criteria.

Bankruptcy is only available to people living in England, Wales and Northern Ireland, people living in Scotland can enter sequestration.

Routes Into Bankruptcy

Traditional Bankruptcy

People can pay £750 and complete the necessary forms at their local country court to be declared bankrupt. If someone is on benefits they will be eligible to pay a reduced amount of £525.

Debt Relief Order

If someone owe £15,000 or less and has little to no assets they may be eligible to enter bankruptcy through the debt relief order route. The DRO costs £90 and the forms can be downloaded online.

Creditor Petition

Creditors can petition a court to have someone declared bankrupt but they have to pay the fees which makes this route the cheapest and simplest. The only problem is most creditors will be reluctant to submit a petition if the debtor has no money or assets.


Scottish bankruptcy is know as sequestration and it also has different routes to enter it in order to help people deal with their debt problem.

Sequestration will last for 1 year but the trustee may decide to implement an income payment order for three years if they feel someone can afford contributions.

Certificate of Sequestration

The certificate of sequestration costs £200 and requires an insolvency practitioner to help complete the necessary forms but a local money adviser can also help.


The low income, low asset (LILA) route into sequestration allows people on a low income with little or no assets to enter sequestration.

Creditor Petition

Just as with bankruptcy any creditor can apply to have someone declared sequestrated so long as they pay the fees and complete the appropriate forms.

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