Overwhelmed with Christmas Debt? Start afresh in January
The festive season is a joyful time filled with gift-giving and celebrations with friends and family. However, come January the bills can pile up leaving many feeling overwhelmed by Christmas debt. Fortunately, in Scotland there are several structured and supportive ways to regain control of your finances, whether through a Debt Arrangement Scheme (DAS), a Trust Deed, or Sequestration (Bankruptcy). Here’s a guide to help you navigate these solutions and set yourself on a fresh path in the New Year.
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Assess Your Current Financial Situation
The first step is understanding exactly where you stand financially. Take time to list your debts, including credit card balances, personal loans and overdue bills. Next, compare this with your monthly income to see how much (or little) you have left for living expenses and repayments. Doing this early can help you identify whether a formal debt solution may be a good option for you. Debt solutions in Scotland are designed to provide manageable ways to handle debt.
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Consider Scottish Debt Solutions
Scotland offers tailored debt solutions that cater specifically to Scottish residents with each solution designed to offer relief and financial clarity.
Debt Arrangement Scheme (DAS)
The DAS is a government-backed scheme designed to help Scottish residents pay off debts over a reasonable period. Under a DAS, you enter a Debt Payment Programme (DPP) which freezes interest and charges, protecting you from further financial strain. Here’s how it works:
- No additional interest: DAS freezes interest and fees on debts, helping you pay off just what you owe.
- Protects assets: The scheme can also protect homeowners who don’t want to sell their property.
- Affordable monthly payments: Your repayments are consolidated into a single, manageable monthly payment based on your income and expenses.
- Protection from creditors: Once your DAS is approved, creditors can no longer contact you or take legal action to recover the debt.
A DAS is often ideal if you have a steady income and want to clear your debts over a set period without the added pressure of increasing fees and charges. It’s not a formal insolvency option but an agreement with your creditors under Scottish Government legislation. It will have an impact on your credit rating.
It is a legally binding agreement between you and your creditors, overseen by a licensed Insolvency Practitioner. Here’s what to expect with a Trust Deed:
- Debt write-off potential: Typically, a Trust Deed lasts around four years, after which any remaining unsecured debt is written off.
- Reduced monthly payments: Your Insolvency Practitioner will work with you to agree on an affordable monthly payment, making it easier to manage day-to-day expenses.
- Legal protection: A Trust Deed protects you from creditors trying to collect the debt directly once the agreement is in place.
While a Trust Deed is generally suitable for people with unsecured debts of over £5,000, it’s important to consider the long-term impact. This will affect your credit rating, may have an impact on your assets and it is a formal insolvency option.
For those with high levels of debt and limited ability to pay it back, Sequestration (the Scottish term for bankruptcy) may be an option. Sequestration provides complete debt relief, but it Is also the most serious form of insolvency.
- Debt discharge: After a period of typically 12 months, you’re usually discharged from your debts.
- Trustee guidance: A Trustee will oversee your finances and assets to determine whether there are any contributions you need to make toward the debt. These can last for four years.
- Fresh start: Sequestration offers a genuine opportunity for a fresh financial start, though it may involve the sale of certain assets, if applicable.
While it’s a powerful solution, Sequestration is typically viewed as a last resort due to its impact on credit and the potential need to surrender assets. It is also a formal insolvency option.
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Make January the Month for Financial Planning
Beyond tackling holiday debt, consider using January as a time to establish good financial habits to help you avoid similar debt cycles. Start by creating a realistic monthly budget, including setting aside a little each month for next year’s Christmas expenses. Additionally, building a small emergency fund can provide a buffer for unexpected costs, making it less likely that you’ll turn to credit.
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Seek Professional Debt Advice
Every person’s financial situation is unique, and finding the right path can be complex. In Scotland, there are free, reputable advice services such as Citizens Advice Scotland, Step Change, and Money Advice Scotland. They offer impartial guidance on Scottish debt solutions and help you choose the best option to suit your needs.
A Fresh Start for the New Year
While dealing with post-Christmas debt can be daunting, the Scottish debt solutions mentioned offer practical ways to regain control and achieve a fresh start. By choosing a path that best suits your situation, and committing to a realistic financial plan, you can begin 2025 with a clear, achievable strategy for financial wellness.
So, take that first step towards debt freedom this January—your financial future is well within reach!
If you’re feeling overwhelmed by problem debt, reach out to our experts at TC Debt Solutions, Thomson Cooper’s specialist debt team. We offer free, confidential, compassionate guidance to help you explore your options and find the right solution. Email advice@tcdebtsolutions.com or call 0800 046 3328. www.tcdebtsolutions.com