Exploring Personal Insolvency Options Due to Employment Uncertainty

Exploring Personal Insolvency Options Due to Employment Uncertainty

The rules governing personal insolvency in Scotland differ from that in England, arguably providing greater breathing space and practical options to individuals battling ‘bankruptcy’, the Scottish equivalent being ‘Sequestration’. As the coronavirus pandemic threatens job security and poses an obstruction to consistent income streams, workers across the country may likely be experiencing serious employment uncertainty.

As the furlough scheme is pencilled in to finish at the end of September 2021, employees may be scrambling to strengthen their finances, or otherwise risk the prospect of personal insolvency. Although lockdown restrictions are slowly loosening their hold on core industries across Scotland, such as hospitality, entertainment and retail, companies are yet to restructure operations and minimise overheads, such as staff, as they continue to withstand the pressures posed by the coronavirus pandemic.

In addition to traditional employment, self-employed professionals and contractors may be struggling to secure stable positions due to the threat posed to public health by Covid-19, restricting business activity and causing a dip in appetite to commission new projects. As this directly impacts the personal wallets of the flexible workforce in Scotland, personal insolvency levels may be subject to rising once government support comes to an end.

The debt solutions available in Scotland are designed to help Scottish residents lead a debt-free life, ranging from Trust Deeds, Sequestration and Debt Arrangement Schemes.

Trust Deed

A Trust Deed is made up of a formal agreement with creditors to repay debts in affordable instalments over an agreed period. Following the repayment of debts, the individual will be discharged from their Trust Deed and be able to start afresh.

Sequestration

The term sequestration refers to bankruptcy and marks the final strike against the financial health of individuals. Residents in Scotland can either enter sequestration voluntarily or be forced into sequestration by a creditor, subject to the amount owed. An insolvency practitioner will be responsible for determining if sequestration is an ideal route as the individual must be insolvent.

The insolvency practitioner will establish a practical repayment solution, taking into consideration personal assets and affordability.

Debt Arrangement Scheme

A Debt Arrangement Scheme (DAS) consolidates debt repayments into monthly instalments, freezing interest and penalties. A DAS can help individuals avoid declaring themselves as insolvent and manage debt more effectively.

The options available for residents in Scotland struggling to pay debts are varied, depending on whether the debts are secured or unsecured. The debt solutions on offer are typically suited for unsecured debts, as they are not tied to security.

Help is at hand – personal insolvency support

Many platforms across Scotland provide personal insolvency support to individuals experiencing serious financial problems. If essential bills and loan repayments can no longer be met due to a monetary deficit, there are practical solutions to help better manage debt and actively tackle outstanding payments.

Charities – There are not-for-profit organisations dedicated to providing debt advice, free of charge, to individuals struggling to fulfil their outgoings. Charities such as the National Debtline can offer guidance concerning debt solutions based on debt levels and income.

Government support – The Money Advice Service is set up by the government to provide free and impartial advice to individuals in debt, with a dedicated outlet for people in Scotland. They offer practical advice on how to manage debt, based on budgets and outgoings.

Regulated Debt Advisors – Debt advisors are on hand to provide specialist debt advice and match suitable debt relief solutions to your circumstances for a small fee. Many are highly skilled, experienced, and qualified to provide support concerning personal unsecured debts.

The Scottish government announced a series of relief measures concerning debt solutions considering the coronavirus pandemic. In addition to personal insolvency solutions, many creditors are directly offering relief to individuals to help cope with Covid-19 employment uncertainty.

Sharon McDougall is a DAS approved manager at Scotland Debt Solutions, a reputable debt advisor in Scotland with over 30 years’ experience in supporting Scottish residents in debt.

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