29 Jul 2021

Best ways to pay off your debts – Scotland


Are you struggling to pay day-to-day bills, or to keep up with loan repayments and other financial commitments? Find out about the options available to clear your debts. However, it’s important not to make any decisions on your own – before you do anything, get free, independent expert advice.

Start by getting free impartial debt advice

You don’t need to pay for debt advice – there are free debt advice services you can use to talk to someone, online, over the phone or near to where you live.

A debt adviser will help you decide the best ways for you to help you manage or clear your debts.

The best time to get help to get yourself back on track is as soon as you start to struggle, or when you begin to worry that you’ll have difficulty meeting your payments.

Options for clearing your debt

There are many ways to manage your debts – the one most suitable for you depends on your personal circumstances.

This guide gives an overview of what’s out there – there might be some solutions you hadn’t thought of before.

Instead of using a formal debt solution, you might be able to reach an informal arrangement with the people or organisations you owe money to (also known as your creditors). This might involve making payments based on what you can afford, after essential household outgoings.

Under this sort of arrangement, you would also ask them to freeze interest and charges.

Effect on your credit score

Be aware that most of the debt solutions listed below will have an impact on your credit score. This could make it harder in the future for you to:

  • get a loan
  • buy on credit
  • open a new bank account.

The Debt Arrangement Scheme

The Debt Arrangement Scheme is a free debt management solution. It allows you to pay your debts over time at a rate you can afford through a debt payment programme (DPP).

You make one monthly payment through your DPP, which is shared between your creditors.

While you’re doing this, you’ll be protected from creditors trying to recover their money.

All interest and charges will be frozen on the debts included in the DPP if you keep up with your payments.

A DPP is flexible and allows for payment holidays or crisis breaks if your circumstances change while you’re on the programme. 

Who qualifies?

To be able to apply for the Debt Arrangement Scheme, you must:

  • have one or more debts
  • generally, live or be based in Scotland
  • apply using a Debt Arrangement Scheme approved money adviser
  • have a reasonable amount of money left over after paying for basics such as household bills and food.

If you’re a couple and have at least one debt in both your names, you’re both liable for paying off the debt. You can apply for a joint DPP to help manage the repayments.

Finding an approved money adviser

You can find an approved money adviser using a free debt advice service.

A free debt advice service can assess if you qualify and will be able to register your intention to apply for a Debt Payment Programme (DPP). This is known as a ‘moratorium’ and gives you a six-week period (this has increased to six months during the coronavirus pandemic) where creditors can’t take any court enforcement action against you.

If your creditors don’t reply within 21 days of receiving the DPP proposal, it will be assumed that they’ve accepted it.

If any of them dispute it, the Debt Arrangement Scheme Administrator will decide whether it’s fair and reasonable for a DPP to be approved.

Debt Management Plan

This is an arrangement set up between you and your creditors. It’s where you pay back what you can afford on non-priority debts that aren’t secured against your home, after taking into account your household bills.

It sets out how much you’ll repay and agrees on a timetable for repayment.

You normally make one monthly payment to the debt management company. They then pay your creditors for you.

Debt Management Plans are usually arranged for you by a third party – many debt advice charities and organisations can arrange one for free.

Avoid Debt Management Plan providers that charge fees

As more people are facing financial difficulties, more companies have sprung up offering to help people out of their situation.

However, many charge a fee – yet provide the same service that you can get for free from a debt advice service.

Trust deeds

A trust deed is a voluntary agreement between you and those you owe money to (your creditors) to pay back part of what you owe.

It allows you to make monthly repayments against your unsecured debts, typically over 48 months.

When that period is over, the debt is normally written off.

Creditors in the trust deed are usually prevented from adding more interest to the money you owe and from taking further court action against you.

You can apply for a trust deed if:

  • you owe at least £5,000
  • generally, you live or are based in Scotland
  • you have unsecured debts such as credit cards, loans and overdrafts
  • you have excess income with which you can pay towards your debt, or assets that can be sold to pay towards your debt.

Set-up and management costs

The fees to set up and manage the trust deed on your behalf usually ranges from between £5,000 and £7,500. But they could be a lot more if your trust deed is complex.

All fees and costs will be deducted from the monthly payments you make or from the sale of your assets (things you own, such as your house or car).

Beware of companies that charge fees for a trust deed

You might be approached by fee-charging debt management companies who claim they’re able to help with your debts.

These firms might recommend a trust deed even if it isn’t the best option for you. They’ll also charge you high fees.

It’s important to speak to a free debt advice service before taking out a trust deed. If they think this is the right option for you, they’ll refer you to an insolvency practitioner. The insolvency practitioner will set up the trust deed for you without charging an advance fee.


Bankruptcy (known legally as ‘sequestration’ in Scotland) is a way of dealing with debts that you can’t pay.

While you’re bankrupt, any assets you have might be used to pay off your debts.

After a period of time (usually one year), most of your outstanding debts are written off and you can make a fresh start.

You can apply for bankruptcy yourself or a creditor can apply to the court to make you bankrupt.

Applying for bankruptcy

You can apply for your own bankruptcy if you

  • have debts of over £1,500 (£3,000 if you don’t qualify for a Minimal Asset Process)
  • haven’t been sequestrated in the past five years
  • live in Scotland, or have lived there sometime during the past year.

There are three routes to bankruptcy in Scotland.

You must show that you qualify by meeting the following conditions:

  • You’ve been given a formal ‘certificate for sequestration’ by an approved person, such as an insolvency practitioner or money adviser. This states that you can’t pay your debts as they become due.
  • You qualify for a Minimal Asset Process (MAP) bankruptcy.
  • You’re in ‘apparent insolvency’. This means you can’t pay your debts when they’re due. To prove apparent insolvency, a creditor must have gone to court and obtained a ruling that you owe the debt to the creditor.

Your bankruptcy generally ends when you’re ‘discharged’. This is usually 12 months after you’re made bankrupt. But it can be extended if you don’t cooperate with your trustee (person who administers your bankruptcy).

This won’t be received automatically and the trustee will produce a report to confirm whether you should be discharged.

Eligibility for Minimal Asset Process (MAP) bankruptcy

  • You owe at least £25,000
  • your car is worth £3,000 or less (and is reasonably required, such as to get you to work)
  • you have no single asset worth more than £1,000
  • your total assets aren’t worth more than £2,000 in total
  • you must not own or jointly own a house or any other property or land
  • Your only income is benefits or you have no money left after all your essential house bills are paid.

How much does bankruptcy cost?

You must pay a fee of £150 before you apply for bankruptcy. If your only income is certain benefits you won’t have to pay this fee.

If you can’t afford to pay this as a lump sum, it’s possible to pay it in instalments before you can apply.

To apply for Minimal Asset Process bankruptcy, you need to pay a fee of £50. It’s free if you’re on certain benefits.

The full amount needs to be paid and there are no exemptions or reductions available if you’re on a low income.

Who is bankruptcy suitable for?

If you have no real way of paying off your debts, bankruptcy could be a suitable option. However, it’s important not to make this decision alone.

Talk to a free debt advice service first. This is because they might be able to suggest solutions you didn’t know about.

If someone applies to make you bankrupt

Be aware that most companies you owe money to will only make you bankrupt as a last resort. They’ll look for alternative ways for you to pay before applying to the court to make you bankrupt.

You must owe at least £5,000 (currently £25,000 due to coronavirus), although two or more creditors can apply jointly.

The creditor must have sent you a copy of the Scottish Government’s Debt Advice and Information Package at least two weeks, and not more than 12 weeks, before they make your petition for bankruptcy.

They must also prove that you’ve gone into apparent insolvency within the last four months.

This is normally done by proving you’ve been served with either:

  • a charge for payment, or
  • a statutory demand, which is a formal warning that you could be made bankrupt if you don’t pay the debt or make an offer to the creditor.

If a creditor applies to make you bankrupt, it’s important to get free debt advice. An alternative solution may be available for you.

Offer in full or final settlement

If you have a lump sum that would cover part of your debts, you could ask your creditors whether they would accept a part payment and allow you to write the rest off.

Or they might allow you to make monthly payments for an agreed period, after which the balance is written off.


In exceptional circumstances where you have no available income, savings or assets, it might be possible to ask your creditors to write off your debts. However, you must be able to show your creditors that your circumstances are unlikely to improve in future – for example, if you’re severely ill.

To find out if this solution could be suitable for you, talk to a free debt advice service.

This article is provided by the Money Advice Service. 

Talk to a debt advice charity to find out if this solution could be suitable for you. The Charity for Civil Servants provides a free Money Advice & Guidance Service to all current, former and retired civil servants and their dependants or you can call 0800 056 24 24.

The content of this Factsheet has been created by and is provided by The Money Advice Service and is produced under licence from them.
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This factsheet is correct at time of going to print. The law set out in this factsheet applies to Scotland unless otherwise stated.