Difference Between The Scottish Debt System Compared To The Rest Of The UK

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Scotland has its own debt laws which differ from the rest of the UK. If you live in Scotland and are in debt, you have many repayment and other options open to you.

The Scottish debt system is different and it can be confusing for consumers trying to learn about their rights and options when they are struggling with debt.

Debt Management in the UK

In the UK, if you become unable to pay your debts in full you have several options. Your priority debts – such as taxes and rent – should be your first priority. If, after paying those, you have some money left over, you should make arrangements to pay at least some of your debts using that money. You can use a debt management plan or an IVA to do this.

If one of the companies that you owe money to has instigated a CCJ against you, then you may apply for an Administration Order only if your debts are less than 5K and you have very little surplus income. This is a court order that rolls all of your debts into one and it indicates that the court agree that you can only pay a part of the debt. You pay a fixed amount of money to the court and the court distributes that money to your creditors.

If you are unable to pay your debt at all, you should contact your creditors to ask them to write off your debt. If they refuse to do this, then you can apply for a debt relief order. If your debts are less than £15K, and you have no surplus income that exceeds £50, and you have no assets, and as a last resort, if you owe a lot of money and are not in a position to pay it back, you may apply for bankruptcy. While you are bankrupt you are not allowed to take out any credit i.e. more than £500 without the Official Receiver’s permission or work in positions of financial responsibility depending on that employer’s hiring criteria.

Debt Management in Scotland

The IVA system does not exist in Scotland. Instead of Iva’s, Scotland uses the Protected Trust Deed. This is a three-year-long debt management scheme which is available to people who have a debt of at least 10,000 and are able to pay back £150 or more each month. If you successfully complete a three-year-long protected trust deed, then at the end of the deed any remaining debt will be cleared.

Qualifying and setting up a Trust Deed

You need to be residing in Scotland and be a Scottish resident.

There is no minimum or maximum amount of debt required in order to set-up a Trust Deed.

You must be insolvent, meaning your debts/liabilities exceed your assets. You can have a property with equity, but that equity cannot exceed your unsecured debt level.

Usually you need to be able to make some form of repayments each month.

Trust Deeds are handled by IP’s or Insolvency Practitioners (the Trustee). They are the ones that review your circumstance, gather your details and put forth the proposals to your creditors.

A detailed income and expenditure form is done to outline what you can afford to pay each month to the plan. The Trustee will send proposals to your creditors outlining what you will pay them each month, again based on what you can afford. A notice is also placed in the Edinburgh Gazette regarding the Trust Deed.

Five (5) weeks after publication of the notice, if there have been no objections from the majority of your creditors, or from a creditor that has the majority of your debt, the Trust Deed is then registered as protected.

Once the ‘protected’ status has been obtained the Trust Deed is binding to all and your creditors can no longer take any collection actions or activity against you. They are legally bound by the Trust Deed.

You make your payments each month into the plan, the interest and charges are frozen on all your accounts, and within three (3) to five (5) years, you are debt free and starting over.

If you have property with equity, you can be expected to release a portion of that equity during the period of the Trust Deed.

Another Scottish debt management option is the Low Income Low Asset (LILA) debt relief order. This option is open to people who have a lot of debt and no resources to pay it off. The LILA is aimed at people who cannot afford the legal fees associated with pursuing bankruptcy.

Before becoming involved in any of these debt management options, consider other repayment options. Consolidating your debts and using a “snowball” method to pay off the highest-interest debts first is the best option for clearing your debts while still maintaining a clean credit record. Consolidated Credit’s advisors can help talk you through debt management plans and options.

LILA/Low Income Low Assets:

If you reside in Scotland, are having debt issues and struggling with repayments, and cannot qualify for Sequestration, you may be able to apply for a LILA/low income low assets form of insolvency

In order to qualify for LILA you cannot own any one asset worth more than £1,000.

All of your assets cannot exceed £10,000.

You cannot own any property, including raw land or a house.

Your income cannot exceed £237.20 weekly. This is the national minimum wage based on a 40 hour work week.

As you can see it is not just as simple as I live in Scotland and I want to go bankrupt or do a LILA. You need to get professional advice and guidance as to which solution you not just qualify for, but which option is best for you and your situation.


CJ is a debt advisor who writes regularly for a number of websites and blogs. She urges anyone with debt problems to seek help as quickly as possible to take control of their bills and avoid extra charges. Consolidated Credits advisors can help talk you through debt management plans and options.

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