Formal debt solutions such as bankruptcy and Trust Deeds can have an impact on some professions, specifically in the financial, legal, and licensed trades.
If you are in debt and struggling, and your job stipulates that you must declare these issues, you may have to make your employer aware of your situation.
In relation to the debt, there are a few options available to you if you do not wish to enter a formal solution.
You should note that missed payments or broken arrangements with creditors can have a detrimental impact on your credit record.
One option you could consider is a consolidation loan, which is the borrowing of money to combine all your existing debts into one. This would mean making one payment to the one creditor.
There are two types of consolidation loans: secured and unsecured.
Consolidation loans are only useful in select circumstances and may not always be the best option. They can be useful for clearing specific types of debts if you can effectively manage to meet your repayments, possess a stable set of finances, and can keep spending under control.
These loans can be more expensive than other forms of finance, and in circumstances where you cannot pay a secured loan, then your home may be at risk.
Additionally, if you already have high levels of debt and there are other factors having a detrimental impact on your ability to obtain credit, then you may have to pay more in interest, with these loans being more expensive in the long run.
If you are not able to make payments to your debts in full, you can offer token payments to your creditors to show your willingness to pay.
Token Payments constitute the amount that you can reasonably pay at that time and may cause a breach of the original terms and conditions of your agreement, and a creditor does not have to accept them.
These can be useful as a short-term solution, especially with priority debts, but creditors may take action to recover amounts owed.
Full and Final Settlements
A ‘Full and Final Settlement’ is another option, which is an offer you can present to a creditor where you pay part of your debt to them as a lump sum and in exchange, they write off any remaining amount. The advantage is that you will no longer be in debt to the creditors you make the agreement with.
However, this solution requires the creditor to agree and means that they must believe that the lump sum is enough to justify writing off the debt. This will usually need to be a significant portion of the amount owed.
The fact that the debt has not been paid in full will appear on your credit record and can remain there for several years.
Advice Direct Scotland run moneyadvice.scot, Scotland’s national debt service, providing free information and support on a wide range of debt related issues. Our specialist advisers can work with you to assess your current situation and consider what to do next.
You can contact the team on 0808 196 2316, Monday-Friday, 9am–5pm.