| The Scottish Executive is offering 5,000 Scottish | | | | forward. It would, at least, allow them a chance to |
| residents who are in the red and are on low incomes | | | | rebuild their lives eventually. |
| with few assets a chance to have their debts | | | | CAS said there must be careful consideration of the |
| written off. | | | | definition of "income" and "assets" to ensure low |
| This is possible through an escape clause through a | | | | income earners are not excluded because, for |
| new route to bankruptcy as personal debt continues | | | | example, they could own their own home but it may |
| to be a growing problem. | | | | not have any equity in it. |
| Citizens Advice Scotland (CAS) deals with £211 | | | | As well as not being able to declare themselves |
| million of debt a year. The average debt owed by | | | | bankrupt LILA people cannot qualify for a Protected |
| individual clients is more than £13,000. | | | | Trust Deed (PTD), the Scottish version of an |
| Under current law, a debtor can petition for their | | | | Individual Voluntary Arrangement. |
| own bankruptcy if they owe at least £1,500 and | | | | This lets people repay their debt over a specified |
| are unable to pay their debts and at least one of | | | | period, after which any remaining debt is written off. |
| their creditors has taken court action to recover the | | | | Given the lack of success of the Executive's Debt |
| debt. The debtor then becomes known as apparently | | | | Arrangement Scheme (DAS), ministers would have to |
| insolvent. | | | | reassure people this new initiative would work. DAS, |
| However, unfortunately those who are worst off | | | | which is intended to help people rearrange their debts |
| and whose creditors have not taken court action | | | | so they can pay them off, was launched in 2004. |
| cannot access this option. These people could then | | | | Since then, the Executive has ploughed in close to |
| end up in a vicious circle of debt and be pressurised | | | | £12 million but has only helped just over 200 people |
| to make payments they simply cannot afford. | | | | with about £3 million of debt. |
| Now the Executive is consulting on low income, low | | | | DAS is being changed to make it more appealing by |
| assets (LILA) a new route into bankruptcy. If the | | | | freezing interest on debt, but there are still too few |
| scheme gets the go-ahead it could be introduced as | | | | insolvency practitioners willing to become accredited |
| early as April next year. | | | | to advise the scheme, because they don't believe it |
| To come under this category, debtors must have a | | | | can work. |
| weekly gross income of less than £100, do not own | | | | Also, before you are discharged from sequestration it |
| their own home and have assets of less than | | | | will be unlawful to borrow more than £250. This |
| £1,000. This would also declare someone bankrupt. | | | | often rules out the option to continue trading if you |
| The initiative would be funded by the Executive but | | | | are self-employed. You will find it difficult to obtain |
| debtors would have to pay an application fee of | | | | any credit and will be unable to act as a director of a |
| £100. Their debts would then be written off. Based | | | | limited company. |
| on CAS figures, there are about 5,000 people who | | | | While it is good news that a governmental body is |
| would immediately benefit. | | | | finally stepping in to help people in serious debt, the |
| CAS, said that this scheme would make a big | | | | offerings have serious consequences and you may |
| difference to the poorest in society and people who | | | | find it extremely difficult to ever borrow again, that |
| have been stuck in the vicious circle of debt with no | | | | includes mortgages. |
| foreseeable way out of the trap. | | | | Debt is something everyone deals with everyday and |
| Bankruptcy is not an easy option and there can be | | | | you may find you don’t have many options, |
| serious consequences, including the effect on | | | | but the best thing to do is frequently re-evaluate |
| credit-ratings. For some people, it can even | | | | your finances and before you enter into any debt |
| jeopardise their current or future employment. | | | | repayment schemes ask yourself if it is really worth |
| However, for those deep in debt, and require debt | | | | the black mark on your name. |
| help, bankruptcy probably is their only realistic option | | | | |