Solutions For Businesses In Debt

If your company is in a bad financial position and can no longer continue to trade then there are options which you can use to stablise it, some of which will allow you to continue to trade whilst you restructure. Here is an over of 4 of the most common solutions;

  • Compulsory Liquidations
  • Company Voluntary Arrangements (CVAs)
  • Winding-up Petitions
  • Pre Pack Administrations

Compulsory Liquidations

Compulsory liquidations are common in business circles. They usually occur when creditors or the government asks a company to be liquidated. The reason for liquidation varies.

In most cases, the creditors are usually seeking to bankrupt a company. The government, on the other hand, orders for this form of liquidation if a company is involved in tax fraud or has been carrying out fraudulent activities.


Compulsory liquidations are not executed instantly. The process starts with either the government or creditors requesting for a court order to liquidate a company.

If the court sees enough evidence to warrant liquidation, it compels the business to stop operations immediately. By ordering this form of liquidation, the court is able to ensure that all those who incurred damage are compensated and fines and any punitive damages are paid.

When is Compulsory Liquidation used?

This type of liquidation is normally used when a creditor is tired of waiting for their payment. So, he or she petitions to the court to get a wind up order. The minimum amount money owed that can allow one to file for insolvency is £750.

Winding-up Petition

The winding-up petition is a legal document that the creditor files to the court in order to start the process of winding up the company that owes them money. Once filed, the winding-up petition and a hearing date is formally advertised. This will lead to the freezing of all bank accounts that belong to the company.

Submitting a Winding-up Petition

To formally submit a winding-up petition, the creditor sends a written application to the court. The application must contain substantial evidence that the company in question is insolvent and is not paying their debts. It then takes 6 to 8 weeks before the hearing commences.

During this period, the insolvent company can do several things to avoid compulsory liquidation. In order to successfully execute these options, the company must seek business debt advice from insolvency practitioners.

Who Performs Compulsory Liquidation?

This form of liquidation is a court directed procedure. Normally, an official receiver is selected from the court to do the winding up.

The official receiver can decide to pass the case to an insolvency practitioner for them to liquidate the assets. The official receiver performs the rest of the winding up and carries out an investigation to determine the alleged insolvency of the company.


There are several alternatives to compulsory liquidation. They include:

  • Creditors Voluntary Liquidation
  • Company Voluntary Arrangement
  • Company Administration Process

These methods are more flexible and have less detrimental repercussions.

Avoiding Compulsory Liquidations

There are ways through which a company can avoid this form of liquidation. It can do so by acting quickly and seeking voluntary arrangements to pay the debts within a set timeframe.

To know the best options that are available, the company needs to get business debt advice from professionals. This way the company can choose the right option.


Administration is usually the best option, especially if the company has a viable future and reliable cash flow. It ensures the company’s survival by protecting its assets from creditors. This gives the company time to restructure and avoid termination.

Compared to insolvency, administration does not offer great return to creditors. Moreover, it eliminates the possibility of any return. This increases unemployment and prevents the chance of building a successor business.

Act as Soon as Possible

The best way to deal with financial problems in a company is to act quickly. The company must get business debt advice as soon as they spot any problems, like decreasing cash flow and increased pressure from creditors.

Through early detection, the company can take the necessary measures to avoid serious consequences such as liquidation.

During compulsory liquidations, the companies in question can get advice from a licensed insolvency practitioner. He or she offers advice about formal insolvency procedures and explains each insolvent winding-up process to make sure that the company directors are familiar with each of them before making a decision.

Before hiring an insolvency practitioner, it is important to ensure that he or she is licensed. This is because there are some unlicensed professionals who offer misleading information.

With the right information and advice, the company gets to avoid any extra costs during the procedure.

Company Voluntary Arrangements (CVAs)

A CVA or Company Voluntary Arrangement is a common business recovery procedure for insolvent companies. This particular insolvency procedure enables a company that has debt problems or that has become insolvent to come to a voluntary agreement with its business creditors to structure the repayment of all or some of its financial debts over a stipulated length of time.

How Do They Work?

The first part of a CVA is the approval process, which normally takes about 28 days, but in some cases can be up to three months.

The approval process begins with the creditors being asked to take a vote whether or not they wish to accept the proposal. This usually takes place at a special Creditors’ Meeting, although most votes are cast by proxy instead of the creditors being there in person.

Seventy-five percent of unsecured creditors by value who vote must agree to it, as well as fifty percent of non-associated creditors, prior to any CVA being made binding. As a major creditor in the company insolvency, the insolvency practitioner must also approve the procedure.

When the CVA is approved, the company will make a monthly payment from the continuing trade profits. A company also has the option of selling some of it’s assets to make these monthly payments. Under the purview of the appointed insolvency practitioner, the payments are then distributed to all the creditors, either on a monthly basis or as a lump sum.

How Can They Help You Manage Your Debt?

Business debt advice commonly recommends CVAs for a variety of reasons. First, debt deferral reduces cash flow pressure so that your business is not overwhelmed by growing, unsustainable debt.

It also offers a far more realistic repayment structure than other debt management programs so that you pay what the company can manage without straining its finances more than they already are.

Creditors are also more likely to prefer a CVA because it offers them a much better option for recouping costs than flat out business closure or liquidation of assets. Another way this helps you manage your debt is freezing all of them so that there is no additional interest accumulating like it would normally.

And at the end of the term of the CVA, the remainder of debt that hasn’t been repaid is written off.

What are the Pros and Cons?

There are very many advantages to the Company Voluntary Advantage. The first advantage is that it’s a very flexible business recovery procedure, while still being formal and legally binding. It’s not indefinite, and it has a pre-defined agreed on timescale so that you have a clear path ahead.

The business can continue its day to day operations and trade without having to change ownership, management, or lose its workforce. It costs far less than options like structured administration and liquidation. There is rarely any need to buy back or dispose of assets.

The reduced strain of incoming cash flow and realistic payment timelines keeps unduly stress off the company.

The primary legal advantage is that it provides court protection to the business and places a moratorium on creditors raising further legal action. CVAs also offer the chance to reform and restructure the business — usually by removing unprofitable areas — while remaining under management’s control with very little intervention, if any.

The main incentive for a company to choose to go down the Company Voluntary Arrangement channel is that it has a much greater prospect of salvaging the company. This has the dual benefit of saving jobs and also returning value to creditors and shareholders alike.

The only foreseeable disadvantages are the potential for possible liability and the chance that the entire procedure could take a very long time to be complete, which may not be desirable if you want to just abandon the company.

Additionally, an insolvency practitioner could decline a Company Voluntary Arrangement if there has been a history of poor payment or lack of compliance.

You Should Know…

While a Company Voluntary Arrangement certainly creates a firm platform for rescuing a business in distress, it is immensely important to act as soon as possible. It is also important to note that all businesses and situations are different, and for individual cases it is always best to consult a business debt advice professional.

Winding Up Petitions

A winding up petition (WUP) is court-instituted process that seeks to “wind up” the affairs of a business that cannot pay its creditors. In most cases, this happens to a business that cannot pay debts of more than £750.

Some of the people who can file a petition to wind up a company include its directors, any creditor, the Secretary of the State, an administrator, or a clerk of the magistrates’ court.


The purpose of a seeking to wind up an insolvent company is to ensure all its affairs are in order. This includes stopping all its operations, collecting money from its debtors, selling any disposable assets, settling legal disputes, terminating all existing contracts, and settling its debts. Take note that a WUP does not mean that all creditors will get their money.

How The Process Works

To file a winding up petition, one must prove that the company in question owes him or her more than £750. In addition, one must prove that the company cannot pay up the amount of money that it owes.

One way of proving these claims is by getting a form for a statutory demand from your local court and serving it to the business that owes you money. If the business does not pay you within 21 days, you can proceed to file a winding up petition.

You can issue a claim for judgment against a company if an earlier execution does not result in the seizure of assets that can clear all your debts. Another option is proving that the value of a company’s debts is more than its assets.

Since this process involves legal issues, it is wise to hire a solicitor to help you present such a petition in court.

Your advocate will help you complete form 4.2 and a statement of truth, issue the petition, serve the petition, as well as withdraw the petition if necessary. Your solicitor will also come in handy during court hearings.

Court Hearings

Hearings vary depending on where you file for a winding up order. Nevertheless, hearings always take place on the date indicated on the petition. It is not necessary for the individual or business entity that filed a petition to appear in court. They can instruct their solicitors to represent them.

At this stage, one can request the court registrar to make a winding up order. Creditors can also request the registrar to dismiss the petition if the company that owes them money settles its debts.

If the registrar issues a winding up order, the official receiver will begin the process of liquidating the company involved in this case.

This includes investigating its affairs to establish the reason it failed, advertising the winding up order in the London Gazette, meeting with creditors to appoint an insolvency practitioner, as well as collecting and selling company assets in order to pay creditors.


The threat of a wind up order can prompt a company to pay its debts as quickly as possible and seek business debt advice. This is especially true for businesses that want to protect their reputation.

Secondly, the entire process is fast and can force a business to wind up its operations within six weeks. Thirdly, this process is quite affordable compared to issuing a claim.


To start with, this process can be messy if any of the parties involved dispute evidence presented in court. The debtor may mount a successful defense leading to the dismissal of the petition.

Secondly, it may be impossible to reverse the legal process seeking to wind up a company even if the outstanding debt is paid.

For instance, support for your petition from another creditor will lead to the closure of a company even if it pays your debt. Thirdly, the liquidator enforcing administration orders will distribute money realized from sale of company assets in proportion to the value of one’s debts.

A WUP may be necessary in the event a company is unable to meet its financial obligations, particularly to its creditors. One can institute such a process for as little as £750. The pros of a WUP include ability to jolt a debtor to pay off outstanding debts, inexpensive, and it is a relatively quick procedure.

Conversely, its drawbacks include potential disputes leading to lengthy court hearings and distribution of proceeds from sale of a company’s assets in order of priority.

Pre Pack Administration

Struggling businesses often turn to pre pack administration when insolvency seems imminent because of its benefits compared to the alternatives. A Prepack can minimize the damages of insolvency and provide critical business debt help by allowing an insolvent business to continue its operations while under the process of administration.

The company is also given protection from creditor legal action — such as forced liquidation — during this time.

What is Pre-Pack Administration?

Administration is the process by which an insolvent company may be restructured and sold to pay its debts while under the management of an administrator. In the face of looming insolvency, directors may make all the arrangements to sell their company to a buyer(s) — who are sometimes the directors themselves — before appointing an administrator.

Upon being appointed, the administrator immediately sells the company according to the packaged agreement. The pre-negotiated sale of a company’s assets by its directors before the company even declares insolvency is called a pre pack sale and is the essence of pre pack administration.

How does it work?

Companies that have not yet entered insolvency proceedings may agree to a pre-pack sale to avoid the fate of the company being left solely to the administrator.

In this procedure, the directors agree to either buy the company or sell it under certain conditions to a buyer before involving the administrator.

A pre pack sale happens very fast; often within days of the appointment of an administrator. This process is usually agreeable to administrators because it allows them to avoid the risks involved with marketing the company themselves such as the devaluation of the company’s assets.

What are the advantages and who benefits?

Although it is a controversial topic, the truth is many people benefit from pre pack administration. First, directors sometimes benefit by being able to revive the insolvent company as its new owners. Some criticize the fact that prepacks allow the directors who ruined the company in the first place to be central to its future restructuring.

This, however, is not always the case.

Secondly, employees benefit from the continuity of the business by suffering minimal disruption to their jobs during the administration process. The preservation of jobs also facilitates the survival of the business and adds to its value by discouraging longtime employees from leaving.

Thirdly, the interests of secured creditors are served by the speed of the process.

Additionally, the administrator benefits from the ability to sell the company speedily and often for its greatest value. Finally, the most important benefit of the pre-pack administration process goes to the business itself.

By flowing smoothly from insolvency to administration and restructuring, a business preserves its continuity and value.

What are its disadvantages and who is affected?

The major concerns regarding prepacks come from unsecured creditors. Because of the speed of the process, unsecured creditors may not even know until it a sale has occurred, much less be part of the decision making.

This can lead unsecured creditors to distrust the sale and think they could have gotten a better deal had the company been on the market longer.

Additionally, they may not be able to investigate issues regarding improper incurring of credit by directors of the insolvent company. The end result, they feel, favors the directors and secured creditors.

Is pre-pack administration synonymous with business debt help?

A prepack can help a businesses continue operating under new owners should it ever face insolvency. So, under the most extreme conditions, prepacks are a form of business debt help. Selling the company to new owners –whomever they might be- can save a business from crushing debt and give it the chance to restructure.

Prepacks are particularly effective to those who value the company for more than its cash worth in comparison to other insolvency procedures. A company that becomes insolvent may be forced to liquidate by its creditors or it may be entered into administration.

In any case, the future of the company rests in the hands of the creditors whose prime concern is usually retrieving the money owed them, not the survival of the company.

Pre pack administration is usually chosen over other insolvency procedures because it gives the company the opportunity to overcome debt and become successful again in the future.

How Does An IVA (Individual Voluntary Arrangement) Work?

An IVA is a voluntary agreement between you and your creditors, i.e. the organisation to which you owe money, to pay off your debts with them. An IVA will normally last for five years and needs to be professionally set up by an authorised Insolvency Practitioner (IP), who will charge a fee.

During this five-year period, you will be expected to pay what you can afford outside of your agreed living costs.

Is An Individual Voluntary Arrangement Right For You?

You may be thinking at this stage, is an IVA worth it? An IVA is a fairly straightforward way of repaying your unsecured debts in a formal and agreed way and over a fixed time period. Your IP will help you work out what you can afford to repay per month and they will also contact all your creditors to secure their agreement of the terms of your IVA, after which they will no longer be able to take you to court or make you bankrupt.

The IP will also work on your behalf to stop any interest charges or additional payments as part of the IVA. Of course, all this assistance comes at a price – can offer free advice on IVAs however if you proceed with this or any other form of Debt Management then you will have to pay for it (costs will vary depending on your circumstances).

Agreeing To An IVA – The Benefits

There are many reasons why agreeing to an IVA would make good sense. These include:

  • As you only have to make one affordable payment per month, your overall debt can be managed more easily
  • It is likely that a proportion of your unsecured debts will be written off
  • Your creditors will be bound by the terms of the IVA – even if they don’t agree with it
  • All charges on your existing debit, i.e. interest and credit charges, will instantly cease
  • You won’t need to worry about further action being taken
  • Five years is a reasonable and manageable length of time to have to repay the debt
  • Once the IVA has run its course you will no longer owe anything to your creditors

Agreeing To An IVA – The Risks

Like all forms of debt management, there are some risks to consider. These include:

  • Credit reference agencies will be able to see your IVA as it will be entered into a public register. This will affect your credit rating meaning it will be difficult to open up a new bank account, for example
  • In some cases, upfront fees will need to be paid to your IP
  • Any equity in your home will generally be released as part of your settlement
  • Should you fail to abide by the terms and conditions of your Individual Voluntary Arrangement then your creditors can take further action, e.g. make you bankrupt
  • Your creditors will be able to put a stop to any extravagant expenditure during your the term, such as a holiday or even a gym membership. Each form of expenditure will be considered on a case-by-case basis
  • f the debtor has to re-mortgage the property to release the equity, his/her ability to obtain a mortgage may be restricted and is likely to be on less favourable terms. Where the debtor is unable to obtain a re-mortgage, the IVA often can be extended for up to 12 months. Creditors that hold 75% of the debt (by value and voting) must agree to the IVA. Only unsecured debts within the IVA may be written off at the end of the period and those not included will remain outstanding.

How Does A Debt Settlement Arrangement (Ireland) Work?

Until recently it has been quite difficult in Ireland to deal with debts which have spiralled out of control. A major step has now been taken to remedy this, through the passing of the Personal Insolvency Act 2012, of which the Debt Settlement Arrangement provision is part.

Reform of personal insolvency legislation was one of the conditions for obtaining financial support from the European Union and the IMF, following the recession and the crisis in the banking system.

Before the Personal Insolvency Act of 2012, if you were unable to meet your financial obligations there weren’t very many options for Irish debt help. Before this act was passed, bankruptcy was the only formal option that offered both protection from creditors and debt relief agreements to pay off your debts.

many reasons, most people want to avoid bankruptcy at all costs. Applying for a Debt Settlement Arrangement or Personal Insolvency Agreement, or PIA, is now an option for those with moderate debt.

Background of DSA

The pressing need for debt help Ireland has been reinforced by the unprecedented levels of negative equity, which has affected large numbers of mortgage holders as a result of plummeting property values. Because of the negative equity problem, many secured loans, such as mortgages, include substantial amounts of unsecured debt.

This presents lenders with significant challenges as they endeavour to pursue recovery of their unpaid debts.

Three New Options

Against this background, the new legislation for Irish debt help has introduced three new options for dealing with personal debt, each of which aims to help debtors avoid bankruptcy.

The Debt Settlement Arrangement, shortened to DSA, is one of the three, others being the DRN or Debt Relief Notice, and the Personal Insolvency Arrangement, known as PIA.

The legislation also set up a new government body, the Insolvency Service of Ireland (ISI), to oversee and administer all these arrangements.

The DSA applies to you if you have unsecured debts exceeding €20,000. This would include credit cards, store cards, bank overdrafts, utility bills or personal loans. For debts of €20,000 or less, you will need a DRN, while a PIA would apply to secured, as well as unsecured, debts of €20,000 to €3 million.

The First Steps

So if you find you have unsecured debts of more than €20,000, what do you do?  The first thing to do, before anything else, is to ensure you are eligible for a DSA, and the way to do this is to get in touch with a Personal Insolvency Practitioner (PIP).

PIPs are the newly created profession set up to put into practice the provisions of the Personal Insolvency Act. There is a register of PIPs on the ISI website, where you can find one near to you, or you can seek advice from MABS, the Money Advice and Budgeting Service, or from Citizens Information.

The PIP will first review your circumstances to see if you qualify for a DSA. You have to be insolvent under the terms of the Act, which means you are unable to discharge your debts in full, and unlikely to be solvent again within five years. You also need to have been resident in Ireland for at least a year.

How to Qualify for DSA

The PIP will also have to look at your debts. It’s important to note that, if you have unsecured debts such as credit card debts and personal loans, but have consolidated them into your mortgage, they become secured debts and won’t qualify.

The other important point is that at least 75% of your debt must have been built up six months or more before your application. Debts from court fines, family law orders such as maintenance orders, or any awards made against you for personal injury, cannot qualify.

If you prove to be eligible, the PIP will help you draw up a Prescribed Financial Statement, formalising your situation. He or she will also help you apply for a Protective Certificate from the ISI. This prevents your creditors from taking any action against you, while the DSA is being drawn up.

Your Chance to Become Solvent

When the proposed DSA is drawn up, it will be presented to your creditors for approval. It will propose that you pay a certain sum of money each month for five years, though the creditors can raise this to six.

The proposal needs to be approved by 65% of your creditors by value, and if they don’t approve, you may have to consider bankruptcy. You should be allowed to keep your home.

Realistically, you will probably not pay off your total debts in the five years. However, if you adhere faithfully to your obligations, it is likely that at the end of the period, you will be discharged from the DSA, and also from your remaining debts. You will then be officially solvent.

Personal Insolvency Arrangements

PIAs are the new debt resolution plans designed for people with both secured and unsecured debts. They are meant for use by those who can pay back a portion of their debts each month, but cannot meet their full payments on their mortgage, credit cards and personal loans.

These agreements can help Irish citizens struggling in tough economic times.

Do I Qualify For A PIA?

There are very specific eligibility criteria that must be met before applying for a Personal Insolvency Arrangement in Ireland. First, the debt must include both secured and unsecured debts, and the total secured debts must fall between €20,000 and €3 million.

It is important to note, however, that this cap may be raised if all secured creditors agree.

It is necessary to be insolvent based on cash-flow, meaning that applicants cannot pay their debts in full as they come due. This should be a permanent financial issue, with no foreseeable change in the next five years. Applicants also have to be able to show that they can pay back their debts, at least in part.

This requires a steady income that can cover both the cost of living and the payments required in the agreement. Finally, if the applicant is eligible for a Debt Settlement Arrangement, they will most likely not be eligible for a PIA.

The PIA Process

To apply for a PIA, you must first visit with a Personal Insolvency Practitioner. This is a trustee who will help to determine the best way to handle your personal financial crisis and guide you through the application process. The new law establishes these trustees, and the process they must follow.

Personal Insolvency Agreements are administered by the newly established Insolvency Service of Ireland (ISI). After your application is submitted, the ISI issues a protective certificate. This certificate prevents creditors from taking any action against you or forcing you into bankruptcy during the agreement process.

Protective certificates cover applicants for 40 days. If needed, this can be extended to 60 days. If an agreement still hasn’t been reached, an additional 10-day certificate may be requested.

The trustee (PIP) will review your financial statements and propose a settlement for each of your debts. These totals will then be restructured so that you pay toward them over the agreement term.

Most PIAs run six years, although some run five while others are extended to seven. It is important to note that your debt is not written off during a PIA.

You will be required to make repayments to your creditors during the agreement term, once the term has ended any remaining debt is then written off.

Once the trustee has written a PIA based on your financial situation, it must be approved by both you and your creditors. In order to put the arrangement into effect, the creditors who represent at least 65 percent of your debt will have to approve it.

Moreover, at least 50 percent of the secured creditors and 50 percent of the the unsecured creditors will have to approve. Only then can you begin to repay the debts at the restructured rates, and work your way back to financial solvency.

After the agreement term is over, your unsecured debts will be paid off if you have made all of the required payments. Some of your secured debts may also be paid discharged or reduced, depending on your agreement. This means that within a few years, you have gained solvency and no longer need debt help Ireland.

How Does A Debt Relief Notices (Ireland) Work?

Irish residents who are finding it a struggle to make ends meet can now take advantage of new government backed schemes to give them relief from their debt worries. One of which is a DRN or Debt Relief Notice.

A debt relief notice (DRN) is perfect for people who have less than €20,000 in unsecured debt and do not see themselves as being able to repay those debts. A DRN gives an Irish debtor the opportunity to have his or her debts written off completely after a three-year period of supervision.

A person who gains approval for a DRN will not be able to obtain new credit unless he or she notifies the creditor of the existing DRN. In most cases, lenders will be leery to issue new credit to a person with an active DRN.

Do I Qualify For A Debt Relief Notice?

To qualify for a DRN, the debtor must have a low amount of disposable income. He or she must have €60 or less available to pay bills every month. An attorney can help a person to figure his or her disposable income.

A debtor can calculate this figure by subtracting his or her household and necessity bills from the total income that he or she earns on a monthly basis.

The amount that is left after all the survival bills are paid is called the disposable income. If the individual falls within that range of disposable income, he or she may apply for a DRN through an intermediary that has been approved to provide such services.

If the courts approve of the debtor’s information, they will grant a DRN to that person.

How Long Does It Last?

The individual will be on special supervision for three years. After those three years are over, the person can apply to have all the debts removed. A consumer with an active DRN will not have to make payments on the debts, unless that person’s financial situation changes for the better.

Is It Back By The Government?

The DRN is an insolvency solution that was offered as a part of the Personal Insolvency Bill of 2012 and is therefore backed by the Irish Government. The bill was passed to help Irish residents who were caught up in financial hardships. Several other options are available for Irish consumers because of this bill.

Other types of Irish Debt Help

Several other options are available for Irish consumers who need to get out of debt. A personal insolvency arrangement is an agreement that works best for consumers who have secured debts. Secured debts include those that have automobiles, stocks, homes and other assets as the collateral on the loan.

To apply for a personal insolvency agreement, the consumer has to have at least one secured debt. This solution is only available to a person once in his or her life. Those who apply for a PIA may not be in the bankruptcy process or have an open DRN.

PIAs are excellent for restricting existing debts into an arrangement that an Irish debtor can handle. This type of agreement covers up to €3 million worth of debt, and the consumer can usually clear his or her debts within five or six years.

Debt Settlement Arrangement

A DSA or debt settlement arrangement is an option for debtors who have more than €20,000 in unsecured debt. Those who do not qualify for DRNs can get help by applying for a DSA. The DSA only covers secured debts, but there is no limit to the amount of debt the applicant can have.

To obtain an approval for a DSA, 65 percent of the applicant’s creditors have to agree to the new arrangement that person has offered. Approved DSAs last for five years. However, someone who needs additional time may request another year of repayment.

Choosing the Best Solution

It is important for an insolvent Irish debtor to select the right program to get out of debt. A certified Personal Insolvency Practioner can point a person in the right direction for achieving the best results.

Scheduling a consolation with a practitioner as early as possible increases the chances of a debtor nursing his or her credit profile back to health.

Another option is to speak with an attorney about the debt issues. Either way, being proactive is the best strategy for eliminating debt and returning to a place of financial health.

How Does A Debt Arrangement Scheme In Scotland Work?

Are you in debt and looking for a way out of it? If so, then you may be interested in learning about the Debt Arrangement Scheme.

The Debt Arrangement Scheme: What Is It?

The Debt Arrangement Scheme, also known as DAS for short, was introduced in 2004. The Scottish government introduced it as a statutory debt management tool to help people who have debts that they need to repay over a reasonable period of time.

In 2011 the government updated the legislation, and then it was updated again in July 2013.

People who decide to participate in DAS can apply for a Debt Payment Programme, also known as DPP for short.

A DPP allows you to pay off your debt(s) free from interest, fees and charges over an extended period of time, ensuring payments are set at an affordable level whilst giving protection against any legal action from your creditors and safeguarding assets like your home.

Do I Qualify For A DAS?

In order to qualify for DAS, you will need to meet the following criteria:

  • You must reside in Scotland
  • You have to have at least one or more debts
  • After you meet your normal living costs, you should have a reasonable level of surplus income left over
  • You must not be bankrupt, nor should you be in a protected trust deed or subjected to bankruptcy restrictions

All debts can be included with the exception of court fines, child support payments and social security benefit repayments. Mortgage/secured loan arrears can be included. Please note, ongoing mortgage/secured loan payments cannot be included and you must continue to make these out with the DPP.

DAS: How Does It Work?

You will need to speak with one of our advisers, and you will need to tell them about your current financial position. Once they have an understanding of your situation, they will be able to let you know what your options are.

If you decide to participate in DAS, the programme will allow you to pay your creditors back over a reasonable period of time, normally up to 10 years.

However, the actual length of time you have to pay your creditors back will be determined on how much debt you have, as well as how much money you can afford to pay.

When a DPP under DAS is proposed to your creditors, then it is done so in the following way:

  • The proposals are sent to your creditors. They will take a look at them and they can either accept them or object to them. They have 21 days to respond.
  • The DPP will be approved if nobody objected to them.
  • The DPP can still be approved in the event that one or even more creditors object to them, but the proposals will have to be deemed ‘fair and reasonable’. The DAS Administrator will make this decision.
  • The DPP may also be varied to accommodate any changes in your circumstances throughout the period of your DPP.
  • Your continuing money adviser will produce an alternative debt payment plan by evaluating your current situation and then they will send the amended plan for approval.
  • If the varied proposal is deemed fair and reasonable, then your DPP should be approved, either by creditors or the DAS Administrator.
  • If your DPP is refused, then you can appeal the decision. However, it may be worth looking at your other options, including bankruptcy or a protected trust deed.

Only qualified money advisers can advise on and manage a DPP under DAS. A money adviser can be from the free advice sector, for example with your local Citizens Advice Bureau or local authority money advice team, or an insolvency practitioner (or a suitably qualified member of his/her staff) can act as a money adviser for DAS.

The free advice sector advisers will not charge a fee for their services whereas the insolvency practitioner will normally charge a fee.

You can also intimate your intention to apply for a DPP under DAS. This gives you protection from your creditors for a 6 week period, therefore, giving you the time to take advice and prepare your application.

In this 6 week period, your creditors cannot take legal action against you for recovery of their debts. You can only make one such intimation in any 12 month period.

Once the DPP is approved you will benefit from a removal of the pressure caused by creditors, as well as being able to live a more normal life knowing that your debts are being dealt with in a more manageable way.

DAS: The Advantages

  • It is legally binding on your creditors and is supervised by the Scottish Government (unlike an informal Debt Management Plan which creditors can choose to end at any time)
  • Your creditors are stopped from taking any further legal action against you to recover their debts
  • Any arrestment on your wages that is already in place will cease to have effect on approval of your DPP
  • You make one affordable payment normally on a monthly basis which is distributed on a pro-rata basis between all of your creditors.
  • DAS freezes all interest, fees and charges on your debt from the date your DPP application is made and these are written off when the DPP is completed
  • Any assets you own are excluded, including your home, even if there is equity
  • Creditors that reject the proposals can be forced to comply with the arrangement if it is judged to be “fair and reasonable” by the DAS Administrator
  • It is possible to set up a joint DPP, the joint applicants do not need to be jointly and severally liable for any debts
  • It is possible to set up a single debt DPP

DAS: The Disadvantages

  • If you do not comply with the conditions of the DPP then it may be revoked. If this happens then your creditors are free to pursue legal action and to add back on their interest, fees and charges.
  • Your credit rating may be adversely affected
  • There is no debt being written off, only relief from further interest, fees and charges, therefore a DAS may take significantly longer to complete than an insolvency option such as a Protected Trust Deed or Sequestration.

DAS: How Much Does It Cost?

A money adviser who works in the private sector will likely ask you to pay a one-off advice/set-up fee. You may also be charged a management fee that you will pay on a monthly basis.

There is a way you can apply for a DAS for free, but you will need to contact a free advice sector money adviser. Your adviser will provide more information should you agree to a meeting following our initial contact and you will be provided with a list of all non-fee charging money advisers.

What Happens To Your Car And Home When You Have A DPP Under DAS?

If you make your payments to your mortgage, as well as secured loan payments, then your home will not be affected. This is even if you have a lot of equity in your property.

Under this scheme, you are paying your debts back in full, that is why it is different to an insolvency procedure and can mean you do not include any of your owned assets.

It’s also worth mentioning that if your mortgage is in arrears, then you may be able to include the arrears in the DPP.

As for your car, it will not be affected when you enter into a DAS. If your car is financed, then you will be able to include the monthly finance payment as an expense when your DPP payment is calculated.

You can read our FAQs if you want to learn more about what happens to your assets.

Case Studies

Example 1:

A married couple with two kids. The man is working full-time, while the woman is a stay-at-home mum.

The man has debt, around £7k, while the woman has about £4k, and they have £5k in council tax arrears, but it is a joint debt. This means there is around £16k in debt in total.

The couple were paying their debts off, but only making the minimum payments, which is £300, but the high interest rates caused the outstanding balances to be paid off very slowly.

However, the man’s wages were arrested because the council tax was not paid and the amount arrested was £200, this meant that the couple could only afford to pay £100 per month towards their other debts, and not £300 per month as before.

As such, they needed financial and the solution is that they decide to apply for a DPP under DAS. Once agreed, the arrestment stops and they can afford to pay £270 per month to their creditors, with monthly fees of £30 per month. Everything will be paid off within 5 years.

Example 2:

In this example, there is a man who works full-time and he is single. He owns a home that is worth around £140, with an outstanding balance of £80k. He also owns a vehicle valued at approximately £7k, but he didn’t want to sell his home or car because he has a parent that lives nearby and he helps them get around.

As for unsecured debts, he owes about £25000, and the most he can pay back is £350 per month. He decides to go through a Debt Management Company and try to set up a payment plan with his creditors.

However, one creditor rejects his proposal and they insist that he just pays them all of the money in full or they will take legal action against him. The man tries to remortgage his home, but he fails.

The solution is he sets up a DAS and pays around £315 per month. This means he could have his debt paid off in about six years.

His car, as well as his home will not be affected.

As for the creditor who rejected the proposal, they were forced to accept the arrangement because it was deemed fair and reasonable by the DAS Administrator. The creditor cannot take any further action against the man, if he abides by the conditions of his DPP.

Debt Arrangement Scheme FAQs

General Information

What Is DAS?

It is short for Debt Arrangement Scheme, and the Scottish government introduced it because it wanted to help people repay their debts. Under DAS, people can apply for a DPP, short for Debt Payment Programme.

This allows consumers to pay their debts by making one payment per month, and the payment is distributed among their creditors.

Do You Qualify?

You may be eligible to participate in DAS if you meet the following criteria:

  • You live in Scotland
  • You have one or more debts
  • You have a reasonable level of surplus income after meeting your normal living costs
  • You are not bankrupt, subject to a bankruptcy restrictions order or undertaking, or in a protected trust deed

Can Only Individuals apply for a DPP under DAS?

Couples can also apply for a DAS DPP, via a joint application, regardless of the existence of any jointly owned debts.

What Is A DAS DPP?

The DPP is a programme designed to help you pay your debts, and you agree to the programme under the DAS scheme. Basically, it will set out how much money you can afford to pay your creditors on a monthly basis, as well as how long it will take to pay the debts completely off.

Once the agreement is set in stone, you and your creditors will be bound by the terms.

How Long Does A DPP Last For?

It depends on a few factors, but everyone’s situation and circumstances is different. A DPP can last as long as is necessary to repay your outstanding debts. It depends on how much you owe and how much you can afford to pay each month

How do I make a DAS application?

The very first thing you need to do is to contact us, and we will give you advice that will allow you to do decide if DAS is the best option for you to go with. If it is the best option, then your money adviser will help you come up with a DPP proposal, this proposal is then presented to your creditors for their acceptance.

Are You protected While The Application Is Being Reviewed?

You will be able to submit what is known as an ‘intimation’ – this will allow you to be protected from enforcement actions by your creditors for a period of up to six weeks. You can only submit a single imitation in any 12 month period.

How Does A DAS DPP Get Approved?

Your creditors have 21 days to respond to the proposals, and they can either accept or reject them. However, if one or more creditors reject the proposals but they are deemed fair and reasonable, and/or your creditors do not respond within 21 days, then it will be approved.

Upon approval, you and your creditors will have to comply with it.

What Does Approval Mean?

Approval of a DPP means that your creditors will not be able to take legal action against you, such as causing you to go bankrupt or seeking to arrest your wages or even money from your bank account. As long as the DAS DPP is place, the protections will remain.

You must make your payments on a monthly basis and stick to the conditions of the DPP.

I Have An Arrestment On My Earnings. Does This Stop?

Once the DPP is approved, the arrestment stops. Your adviser will make sure this happens.

The Fair And Reasonable Test: What Is It?

It is criteria that the DAS Administrator will use to determine whether an application is approved or denied. Some of the factors that will play a role in the decision are the length of time the DPP will last for, as well as the reasons why your creditors have rejected the DPP.

If we do not think your proposals will pass, then we will let you know and we will find out if there is another option available for you.

What Is A Continuing Money Adviser?

It is an adviser who will act on your behalf during the length of the DPP. They will guide you and provide advice to you throughout your DPP. There are criteria that need to be met before someone can become a continuing money adviser.

Who Is The DAS Administrator?

It is a Scottish government official (Accountant in Bankruptcy), who oversees the administration of every single DAS DPP. They are also responsible for keeping records of all DAS casework as well as approving DPPs, payments distributors and money advisers.

What Is The DAS Register?

It is a public register and everyone has access to it. They don’t have to pay anything to access it, and people can view it to find out who has applied under DAS or if they have been approved for a DAS DPP. A person’s name, home address, and date of birth are all listed in the register.

What Is A Payment Distributor?

This is the firm responsible for distributing money paid into a DPP. Once a DAS DPP becomes approved then a Payment Distributor is appointed. They would contact you in order to make arrangements to collect your payments each month (eg. Direct Debit).

They will then distribute these funds to all of your creditors for you each month. You therefore only need to make one monthly payment to your debts regardless of how many creditors you have. The costs of your Payment Distributor are met by your creditors.

DAS: Does It Cost Anything

You will probably have to pay some fees if you decide to use a money adviser from the private sector. If you want to find out more about our fees, then you can learn more about them by contacting us.

It’s worth noting that if you apply for a DAS through a local authority money advice centre, then you will not have to pay anything.

How Much Money Will You Have To Pay Towards Your Debts?

It is entirely up to you how much you wish to offer to pay towards your debts under DAS. However, most creditors will expect you to pay whatever you can reasonably afford after your essential living costs are met each month.

Following legislation changes in July 2013, all money advisers in DAS now follow the Common Financial Statement (CFS) when calculating your surplus income.

What Is CFS?

It is short for Common Financial Statement and it is a budgeting tool. It is something that money advisers use when figuring out a person’s expenditure. The Money Adviser that you work with will use CFS, as it must be used in all DPPs under DAS.

Do You Need To Include All Of Your Debts?

No you don’t, it is possible to leave some debts out with your DPP. However, it’s worth noting that if you choose to do this, then your DAS DPP may not be approved.

Will Your Interest, fee And Charges Be Frozen?

A DAS will indeed freeze fees, interest and charges from the date you have applied for the DPP. As long as you complete the DPP, then charges, interest and fees will be frozen.

Do You have To Deal With Your Creditors Still?

The good news is no. You simply make one payment to the distributor and they will divide the money between all of the creditors. You just need to stick to the agreement and then you will not have to deal with your creditors, and they will not be able to take action against you.

If for some reason you are still being contacted by your creditors, then you should let your adviser know and they will stop it as soon as possible.

If Your Circumstances Change During Your DPP, Then What Happens?

One of the best things about a DPP is that it is flexible, and it can change when your circumstances change. Should changes happen, you are entitled, in certain circumstances to a 6-month payment holiday.

Will Your Credit Rating Be Affected?

The chances are your credit rating will be affected because creditors, as well as credit reference agencies may look at the DAS register. Your credit file may be updated because you are defaulting on your original agreements that you had with your creditors.

Will Your Bank Account Be Affected?

You may be able to use your current bank account, but you might have to get yourself a new bank account provider. This is usually true if you owe money to a bank that is going to be included in the DAS.

When The DPP Is Completed, What Happens?

When your DPP is completed, then your information in the DAS register will be removed. Your creditors will also be informed that you have paid all of your debts in full via the DPP.


Do You Lose Your Home?

Your home is not affected, so you will not lose your home as long as you maintain your mortgage payment and payments to any loans secured on it. The DAS was created because the government wanted to create a safe way for people to pay their debts back, without the risk of losing their homes.

In matter of fact, it should be easier for you to pay your rent or mortgage once your DAS DPP is approved. DAS is a great alternative to bankruptcy and other options that may put you at risk of losing your home.

Will Your Mortgage Or Rent Arrears Be Included?

If you wish to do so, then it is possible to do this.


Can You Lose Your Car?

Your car, just like your home, will not be affected when you enter a DAS DPP. However, you are free to sell your car to help you pay your debts off quicker, but this is not required.

Also, if your car is on a hire purchase, then you can still keep it, but you need to maintain your HP repayments.

Information Regarding Employment

Can Your Employer Find Out?

We don’t contact them, unless you wanted your payments taken right from your salary. However, if your employer accesses the DAS Register, then they can find your information. It is unlikely that employers would choose to search this register.

I’m Self-Employed, Can I Still Apply For DAS?

Yes you can, although if you wish to apply for any further trade credit additional to any pre-existing arrangements then you must give notice of your DPP in writing to the potential lender.

Will Your Employment Be Affected?

It is possible that your existing employment may be affected when you apply for a DPP. It can also affect future employment opportunities. If you have concerns about whether or not applying for a DPP will affect your work life, then you should contact your HR department or take a look at your employment contract.

You should also consider getting further legal advice if you work in the financial services industry, armed forces, licensed HGV driver, police or prison service. You should also seek further advice if you are a Chartered Accountant or if you belong to a recognized professional body.

When you speak with your adviser, they will let you know whether or not you should seek further advice.

How Does The Bankruptcy Process Work?

If you have severe financial difficulties, the most extreme option available to you may be bankruptcy.  Before considering this as an option you need to be fully aware of what this option is and the consequences of becoming bankrupt.

Bankruptcy is considered to be one of the most extreme debt solutions and only an option if you have severe financial difficulties and cannot pay off the excessive amount of debt that you are burdened with.

Before applying to be bankrupt and going down this road you must be made aware of how it works and what the outcomes are.

While there are certain advantages to becoming bankrupt – such as being free from debt with your assets shared fairly amongst your creditors – it should not be seen as the first and only solution.

ou will be required to give up valuable possessions, possibly even your home and your business – should you run one – along with all its employees.

How The Bankruptcy Process Works

Following a bankruptcy petition which is placed by either yourself or your creditors, a court has to make a bankruptcy order. This begins the process, from which point – whether you agree with it or not – you must engage with it fully.

If your creditors presented the petition then the issue can still be resolved before the court gets involved; once it reaches the court however it is much more difficult, costly and time-consuming to stop the process.

Prior to all this, once you have provided Simple Financial Solutions with all the information, we should be able to have your petition ready within a few days. Once the bankruptcy order has been made the Official Receiver will give order of the notice in the London Gazette and other publications if necessary.

Next, a court hearing date will be set involving just you and the bankruptcy clerk who will take you through the papers you need to sign and make you take an oath that all the information contained within the papers is correct to the best of your knowledge.

These papers are then sent to the judge who will declare you bankrupt.

What Happens After You’re Declared Bankrupt?

The Official Receiver will ask you about any assets and bank accounts that you may have.

They then have to give notice of your bankruptcy to a range of organisations including local authorities, courts, sheriffs, bailiffs, HM Revenue and Customs, utility suppliers, the Land Registry, banks, building societies, mortgage companies, pension companies and insurers to further investigate the full extent of your assets and liabilities.

Once you are declared bankrupt you will have a number of responsibilities. You must comply fully with any requests made by your Official Receiver, whatever they may be. You must also inform your Receiver of any changes to your financial circumstances whilst you are a bankrupt (e.g. inheriting money or property, or receiving a payment from a claim).

You won’t be able to secure more than £500 credit without declaring you are a bankrupt nor can you make direct payments to your creditors. You must steer clear from using your bank account(s) from the outset – we can advise on choosing a new account though.

Looking ahead though, there is light at the end of the tunnel; after a maximum of 12 months, or even less in some cases, you will be free from bankruptcy.

How Does Bankrutpcy Work In Scotland?

Sequestration is the Scottish equivalent of bankruptcy and signifies a legal order which confirms to your creditors you are unable to repay the money you have borrowed.

It is only available to people living in Scotland and the Certificate of Sequestration came into effect in November 2010, making it easier to proceed with your own sequestration.

The Low Income Low Asset (LILA) represents another route into sequestration and was introduced in April 2009. Both of these routes involve different qualifying criteria however advantages and disadvantages of sequestration are relevant to both.

If you are a resident of Scotland and in financial difficulty, Simple Financial Solutions can advise you on your next step. It may well be Sequestration however a Scottish Trust Deed or Debt Management Plan may be more appropriate; either way, we will only propose what is best for your situation.

Who is Sequestration for?

Sequestration could be for you if you meet the following criteria:

  • You owe at least £1,500 in unsecured debt
  • All other debt solutions wouldn’t help you resolve your situation
  • You will require ‘apparent insolvency’

To apply for sequestration a creditor must agree to make you bankrupt; this then gives you ‘apparent insolvency’ which means that you are unable to meet regular payments.

Some form of legal action will be taken against you by your creditor, typically a Charge for Payment Order, a Statutory Demand or an Earnings Arrestment.

You will also need to consider the costs; £100 will be required to administer the sequestration, there will be court fees and you’ll also have to pay your Insolvency Practitioner (both an upfront fee and regular charges to look after your payments to your creditors on your behalf).

Advantages of Sequestration

The advantages of sequestration are similar to bankruptcy:

  • All regular payments to your creditors will stop, leaving your Insolvency Practitioner to deal with them from now on
  • Once your sequestration is completed (to the satisfaction of your Insolvency Practitioner) then you can start to get your finances back on track

Sequestration is backed by the Scottish Government so there is no need to feel ashamed by entering into it – thousands of people have been, and still are, in the same situation as you.

The Sequestration Order was put in place to help people whose financial situation has reached breaking point. It is not a Debt Management Plan or IVA therefore no regular monthly repayments are required.

Disadvantages of Sequestration

Again, bankruptcy and sequestration share similar disadvantages:

  • Any spare cash that you may have each month will have to go towards your sequestration
  • Your house, car or other valuable assets may have to be sold
  • Your credit rating will be affected making it more difficult to obtain credit in the future (despite being discharged from your sequestration after one year a note will remain on your credit file for six years)
  • You cannot act as a director of a limited company

How To Deal With Bailiffs & Debt Collectors

Of all of the measures the council can take to force you to pay your council tax arrears, the one guaranteed to strike fear into the hearts of most people would be bailiffs.

Having someone enter your property and remove possessions to sell at auction to pay your debt is frightening and embarrassing.

Bailiffs can look very official and behave aggressively to get what they want, yet you may not realise that they do have the powers you think they do.

In fact, their powers under certain circumstances are quite limited. This is a brief guide to dealing with bailiffs over council tax arrears.

Why Are They On Your Doorstep?

If you have fallen into arrears with your council tax and cannot make payments to clear those arrears, the council will apply to your local magistrates’ court for a liability order. Employing bailiffs is one of the options under the liability order that the council can choose to obtain payment from you.

What Do They Want?

In a word money. Even at this stage you can offer to pay what you owe so they do not take your possessions and if you can do this, it is the best course of action to ensure the situation doesn’t escalate.

Make an offer of what you can afford to pay, although a better way of doing it is to make payments directly to the council and write to the bailiffs letting them know this is what you intend to do. It is harder to get bailiffs to agree to take money once they have gained access to your home.

If you do make any payments to the bailiffs, make sure you get a receipt.

Do You Have To Let Them In?

Bailiffs have no automatic right to enter a property if they have not been in before and you do not answer your door. It is illegal for them to break in, and they cannot get the police to help them. However if you open the door they can push past you or even get in through unlocked windows and doors.

If you must speak to them, do so out of an upstairs window and make sure you lock it afterwards. Don’t fall for any requests for quiet chats, a glass of water or to use your toilet.

If they have been in before, they have a right to enter again but only in connection with this specific council tax debt as stipulated on the court’s liability order.

They are not allowed to come in and take goods to sort out another debt they have been employed to collect upon, even if it still relates to council tax, if it is the subject of a different liability order.

They have to go right back to the beginning of the process and start again to gain access with the different court order.

Be Careful Of What You Store In Outhouses

Even though it is illegal, bailiffs have been known to get into sheds, greenhouses, garages and outside offices to take what they can, so it is wise to keep any valuable items you need stored inside the house or elsewhere off the property.

This includes cars, motorbikes and other vehicles, as a bailiff may have the authority to take your vehicle/s.

They Got Into The House. Now What?

If you decided to let them in or they got in, they will look for things to take that can be sold at auction, however the list of what they can and cannot take is not clear cut.

They cannot take anything that does not belong to you, although you may have to prove this by receipt or by a sworn statement from the owner of the goods, and according to the regulations they are not allowed to take:

  • Such tools, books, vehicles and other items of equipment as are necessary for use personally in employment, business or vocation”
  • Such clothing, bedding, furniture, household equipment and provisions as are necessary for satisfying basic domestic needs of the person and family”

A bailiff should only take enough goods that will generate the sum required to clear the debt at auction and no more, and they should provide you with a clear list of items they are taking. Generally, it is considered pretty low for a bailiff to take something clearly belonging to or used by a child. Most will not want to be seen to do that.

For obvious reasons, they cannot take anything that is hired or rented.

What paperwork do they have to have with them?

First of all, a bailiff must have written council authorisation for them to call on you. If they do not have it, do not talk to them as they may not be properly ‘certificated’ bailiffs.

Usually the council will have obtained a liability order through the magistrates court given them permission to take action to recover what you owe, and employing bailiffs is one of those actions.

Even if you receive a letter from the council warning you that a bailiff may call, still do not deal with them if they do not have the proper paperwork.

Second, the bailiffs should leave you with a copy of the enforcement regulations, which stipulate what they can and cannot do within their powers.

Third, they should leave you with any agreement you have signed, which may contain a list of goods they may take on their next visit if you do not stick to your agreement. By the way, it is illegal to hide these goods if they are listed on a ‘walking possession’ agreement.

Finally, they should leave you with details of the charges they make each time they visit. They can only charge you for two visits if you refuse to let them in, and then the bailiffs must return the contract to the council.

How to deal with Council Tax arrears

If you’ve fallen behind with your council tax payments you’re not alone. Hundreds of thousands of people are facing action from their council authorities due to council tax arrears.

Many have fallen foul of the Government’s cuts in benefits, with people previously exempt from paying now having to find impossible sums of money every month to pay their council for household services.

However, unlike normal unsecured debt, such as credit card balances, overdrafts or utilities arrears, council tax arrears cannot be written off by anyone other than a magistrate and only then after every avenue has been explored by the courts.

The debt must be paid, and paid in full, and it can be a harrowing experience if you don’t.

But what if you simply can’t pay the arrears that your council is demanding in the timeframe they want? What then?

Arranging a better payment plan

Your first port of call is to speak to the council and see if you can arrange a payment plan that suits you, rather than it. Usually the council will want the debt to be paid before the end of the current financial year on 4th April.

If you cannot do this due to your circumstances, for example illness or unemployment, they will usually agree to let you pay it back over a longer period of time but you will have to ask and sometimes even insist.

You will be expected to make your normal council tax payments every month along with a proportion of your arrears on top.

A liability order

If you do not pay your arrears or sort out a payment plan to do so, your local authority will take action through the courts to obtain a liability order to force the money from you. It can do this is several different ways.

Benefit Deductions It asks the Department of Work and Pensions to take a monthly amount directly from your benefits before you get it. You then end up having to live on whatever is left over.

Attachment Of Earnings Order It asks you employer to take a monthly amount directly from your wages before you get it. Again, you end up having to live on whatever is left over.

Bailiffs It will employ bailiffs to visit your home and seize your belongings to the value of your debts.

Bankruptcy It will apply to the courts to make you bankrupt if you owe more than £750.

Charging Order If you owe more than £1000 the council can obtain the power to force you to sell your home and make a payment on your arrears once your mortgage has been paid off.

A Committal Warrant

If the council cannot make any of the above work in your circumstances, it can go back to the magistrates’ court and apply for a committal warrant to send you to prison.

This is a very serious step, and not many cases get this far, but if it can be proved that you have the money to pay and are deliberately not paying, or are making no effort to pay and none of the measures above have worked, the council may feel prison is the only resort left.

However, even at this late stage you will still be given the opportunity to set up a payment plan to pay off your council tax arrears.

If you still maintain you cannot pay your arrears, the magistrates will look at all of your financial affairs as part of a means enquiry, and if it is proved you have no means to pay, it is within the magistrates’ power to write off some or all of the debt.

Having council tax arrears that you cannot pay can be a very stressful experience, especially if the council gets the courts involved.

Loans For People With Bad Credit – Q&A Guide

If you have bad credit, you might be thinking that you can never apply for a loan or get credit. It doesn’t have to be this way. There has been a lot of research done in the UK about the number of people who are ‘underbanked’ meaning they don’t have access to financial products as much as the general population.

There are 10 – 14 million Brits who struggle to gain access to mainstream credit products such as credit cards and loans for a wide range of reasons, according to research by PwC.

The firm noted that this segment of society is large, underserved and the financial industry has a duty to create products for it. Loans for bad credit and credit cards are just two of the many products that people with bad credit scores can apply for.

Whether you have low credit or you don’t have much of a credit history, you can still find financial products that suit your lifestyle. In this guide, you are going to learn everything that you need to know about loans to empower you to make informed decisions about your personal finances.

What Are Bad Credit Loans?

This is one of the most frequently asked questions about this type of loan that we receive at Essentially, loans for bad credit are specialised short term loans that have been tailor-made for people without a credit history or people with bad credit scores.

You might fall into these categories if you don’t have a history of borrowing previously or if you have missed a few payments in the past on bills such as making late payments on your gas & electric bills.

Loans for people with bad credit can be issued by consumer credit companies that offer these loans in the short term. This means you need to repay them within the time period of 12 months or less.

It is critical to understand that you must have monthly income via a salary or self-employment in order to successfully manage your money.

What is APR?

APR stands for annual percentage rate. It’s just a more formal way of calculating the amount of interest you pay on top of your loan. For example, if you borrow £1,000 from a lender, and they give an APR of 12% this means that you will pay interest of £120 spread out across a calendar year of 12 months.

All loans have APR calculated on them and the percentage rate differs from lender to lender. There is a maximum APR as determined by the Financial Conduct Authority so consumer credit loans do not put people into financial difficulty.

How Much Can I Borrow With A Bad Credit Loan?

Each amount that you can borrow depends on your personal circumstances. However the rule of thumb is most responsible lenders will offer you between £100 to a maximum of around £5,000.

This is in line with what the average Brit borrows. The Money Charity found that the average British consumer has about £3,900 in consumer loans that have been borrowed.

The amount that you can borrow depends on how stable your job is and your history with repaying loans and debt repayments on time. One tip that we have is use loans of this type to repair your credit score by applying for small amounts under £1,000.

As you repay your loans on time, then you can apply for larger amounts. This also teaches you financial responsibility and it shows you how credit works. The more you repay on time, the bigger pool of loans you can get access to.

Are These Types Of Loans Expensive?

In the financial services industry, people with bad credit are given higher interest rates (APR) compared to people with better credit scores.

Why does this happen? It happens because it is riskier for banks and consumer credit companies to lend to people who earn lower incomes, for example.

This doesn’t mean that they will not lend money to you – it just means companies want to mitigate their risk in lending to people who might fail to repay. The more you borrow, the more expensive it is for you to repay.

How Can I Apply For A Bad Credit Loan?

We have collected a wide selection of loans for bad credit that you can see on this page. We have chosen the best ones that have a variety of maximum loan limits and interest rates.

All you do is click the loan that you want with the provider that you wantand apply.

Each loan provider has different terms and conditions which you must fulfil in order to be approved. Make sure that you read them before applying and using the loan that you have received.

Are They Approved Instantly?

It depends on which provider you have chosen. Some loan providers approve loans within 1 hour, 12 hours or just under a day. Others take longer however the industry standard is leading towards loans being approved on the same day.

Some companies also will approve the loan with no credit check, which can be beneficial if your have a low credit score, although the interest rates are likely to be higher. As technology becomes more sophisticated, it is easier for companies to decide who can receive a loan on the same day.

This is because credit check technology has improved significantly.

How Should I Manage The Repayments?

Only borrow amounts that you can manage. If you need a loan of £500, you should keep it separate from your general personal finance such as the money you use to repay bills.

If you are taking out £500 for a personal reason, create a dedicated budget for this loan in a spreadsheet.

This will help you see exactly where every pound of your loan is going. Too often people overspend especially on money they have borrowed and end up feeling worried about how they could have spent cash so fast.

If you keep track of your bad credit loan spending in a spreadsheet, you are being accountable for your spending in a way that is healthy and responsible.

Do I Need A Guarantor?

No – times have changed and you no longer need a guarantor for the majority of consumer credit loans that are on the market. Always read the small print though to be sure.

I’m Bad With Money. Can I Still Get A Loan? is committed to only showcasing loans from responsible lenders who are dedicated to ensuring that vulnerable people don’t fall into debt problems.

If you have suffered with a bad credit score before, we suggest that you contact the Money Advice Service or your local Citizens Advice Bureau to learn all about budgeting and how to manage your personal finances effectively.

Once you know how to budget and balance your weekly budget, you can apply for a loan.

The most important thing to understand is that bad credit loans need to be repaid with the specific amount that the lender gave you. If a lender tells you to repay £50 on the 30th of the month, you must ensure that you repay this amount on that day to avoid being charged late payment fees.

What Happens If I Miss Repayments?

We know that sometimes life gets in the way of best practices. Sometimes, you might miss a repayment even though you had no intention to due to unforeseen circumstances such as becoming ill.

Instead of missing the repayment, alert your direct lender beforehand to let them know that you are struggling financially. Each lender has their own policy on how to deal late payments.

The more transparent you are about missing a payment, the better it is for your credit score.

I’m Self-employed. Can I Apply?

Bad credit loans are for people who receive a monthly salary or income that is stable. If you are self-employed, you can apply for a loan but your self-employment should be a stable stream of income. You shouldn’t go months without earning any money, for example.

If you have your own small business, you should be paying yourself a monthly salary at the minimum of £1,000 in order to afford taking out a loan.

Your monthly income should be paid around the same date every month so that you can make your repayments without any hassle.

Are There Any Other Options For People With Bad Credit

Bad credit loans from responsible lenders are good avenues to improve your credit, however, you can also get loans from credit unions. Credit unions tend to charge lower interest rates compared to consumer credit loans.

That said, you need to join credit unions and put your savings with them in order to be eligible for loan products by credit units.

Another option that works for people with bad credit is a budgeting loan that comes directly from the government. The amount is around £812 and it is interest free. This might work for you if you need a cash injection into your personal finances.

However, you need to be currently receiving income support, pension credit, and other income-based benefits in order to receive it. If you are receiving Universal Credit instead, you can receive a budgeting advance from the government.

Applying for a credit card is another popular alternative to bad credit loans. The reason why some people like them is because they allow you to get points and they can be helpful to teach you how to budget as long as you repay your card in full at the end of the month.

Credit cards come in all shapes and sizes so make sure you shop around for the ones that suit your lifestyle.

How Can I Improve My Credit Score?

Improving your credit score is critical if you want to reach important milestones such as being approved for a mortgage. There are a variety of ways that you can improve your credit score:

  • Register to vote and be on the Electoral Roll
  • Repay all of your debts on time
  • Pay your bills such as gas & electric on time
  • Don’t apply for multiple loans at once

Personal financial management is the key to improving your credit score. Pay all of your bills and repayments on time and you will find that your credit score will improve gradually.

Avoid getting yourself into trouble such as declaring bankruptcy or having County Court Judgments (CCJ) against you because these can negatively impact your credit score.

Why Should I Compare With

You should choose loans through us because we have especially curated loans for people that have bad credit. All the loans that you see on this page have been thoroughly checked by us and they are some of the best loans in the UK for people with bad credit.

We are here to serve you to help you make informed choices about your personal finances. If you have any other questions about bad credit loans relating to your own personal situation, don’t hesitate to get in touch with us.

We have also created a checklist for people who want to take out these type of sub prime loans. Feel free to use our bad credit checklist to help you manage your money effectively.

Bad Credit Loans Checklist

  • Create a monthly budget including loans and debt repayments
  • Write down the monthly dates when loan repayments are due
  • Manage loans in a separate budget
  • Print out spreadsheets with your loan repayments and details
  • Write down your loan details in your smartphone’s note app
  • Note your interest rate
  • Read terms and conditions before applying for a loan
  • Only have one loan at a time
  • Choose one alternative for bad credit loans (credit cards or a credit union) instead of choosing several options at once

Marriage tax allowance – Couple’s can claim back £100’s

Marriage Tax Allowance – You could cut £900 from your tax bill this year?

If you’ve never claimed the marriage tax allowance the back pay could leave you almost £1,000 better off this year. Here’s how:

According to HMRC figures and a BBC report, there were just over 4 million couples in the UK (either married of in civil partnerships) who could have claimed the ‘marriage allowance’ last year.

Yet, since it launched in 2015, only 2.2 million have done. So if you’re one of the people who hasn’t looked into it because you don’t know about it or you assume you won’t be eligible, it’s time to take a closer look.

What Is The Married Couple’s Allowance?

One of the longest standing and biggest financial frustrations of being in a partnership is when one of you earns less than the current personal tax allowance threshold, but you can’t transfer any of that surplus allowance to your partner.

But in 2015 there was a change. From 2015 onwards, you’ve been able to take 10% of your tax allowance and give it to your spouse/partner in a marriage allowance transfer.

Married Person’s Tax Allowance – An Example

Suppose you’re a teaching assistant. You earn about £9,000 a year, but the personal tax allowance 2017/2018 was £11,500. So that’s £2,500 extra you could have earned tax free, but you didn’t because your wages just aren’t that high.

Until 2015, you’d have lost all the benefit of that £2,500 of personal tax allowance.

Now, you can transfer up to 10% of tax allowance to your partner, providing you haven’t used it.

So in this case, you’d be able to give your partner £1,150 of your tax allowance. That means they wouldn’t have to pay tax on an extra £1,150 of income, over and above their own existing personal tax allowance. That would be worth £230.

Do We Qualify?

As you might expect, there are a few conditions to claiming these marriage tax benefits:

  • You must be married or in a civil partnership. If you’re ‘unofficially’ living together – even if you’ve been living together for decades – you won’t qualify for the HMRC marriage allowance
  • One of you needs to be earning less than the current tax allowance threshold
  • The other needs to be paying tax at 20%. If you’re in a higher tax bracket, you won’t be eligible for the married couple’s tax allowance
  • It doesn’t matter whether you are employed or self-employed


If The Marriage Tax Allowance Was Worth £230 Last Year, Where Does The £900 Figure Come From?

The great thing about the HMRC marriage allowance is you can backdate it to 2015, or as far back as you meet the criteria.

Obviously, you’ll need to have been in a marriage or civil partnership from the point you claim, and you’ll also need to have satisfied the income requirements each year since then to claim the full backdated amount.

Each year, the personal allowance changes, so the amount you could have claimed has changed too. In 2015 it was worth £212. The personal tax allowance 2016-2017 was £11,000, so the marriage allowance was worth £220, then £230 and in 2018 its value rises to £238.

Add those together and you reach a total in excess of £900.

As long as one of you continues to earn less than the personal tax allowance and the other remains below the higher tax bracket, you’ll continue to benefit from a £200+ marriage tax boost each year.

It’s also worth remembering that the married couple’s tax allowance can be backdated even if your partner has died since 2015.

How Do We Apply?

This part’s crucial: the person who needs to apply is the lowest earner (i.e. the person transferring part of their personal tax allowance).

You can apply online and it’s a simple process: you’ll just need the National Insurance numbers for you and your partner, and proof of identity.

Once you have submitted your application you’ll get an email to confirm your application has been received and another to confirm the HMRC’s decision.

As long as you remain eligible for the marriage tax allowance, you’ll continue to have 10% of your tax allowance transferred to your partner each year.

What If I Earn Less Than My Tax Allowance, But Not 10% Less?

A curious quirk of the marriage allowance transfer rules means that you can transfer all of it, or none of it, but you can’t transfer a part of it. Even so, it may still be worthwhile doing even if your wages creep over the threshold.

Let’s go back to our teaching assistant, who this year is working a few extra hours and has had a pay rise to boot, bringing earnings to £11,000. The personal tax allowance this year is £11,850, and once again 10% of it is transferable.

£11,850 – £1,185 (10%) leaves a new personal tax allowance for this year of £10,665, so there’s now a gap of £335 between earnings and personal allowance. That amount will be taxable, and at 20% that will mean tax deductions of £67.

The benefit to the partner, however, is £238 and you don’t have to be a maths whizz to work out that on that basis the marriage couples’ allowance is something that’s still very much worth doing.

What Happens If My Wage Fluctuates Month To Month?

The key calculation is the amount you and your partner earn in a year. So if you do some extra shifts that give you a bumper month it doesn’t matter as long as the total for the year remains below the tax allowance threshold.

Similarly, as long as you remain within the 20% tax bracket for the year, it doesn’t matter that, for a couple of months, you earned what would otherwise be a higher tax rate income.

Naturally, neither you nor HMRC will know for sure how much you and your partner have earned in a year until the year is done. If it turns out that you owe HMRC money, they’ll recover it through self-assessment or payroll.

If you’ve not considered applying for married couples tax allowance before and you think you might qualify, do it now. It could save you hundreds of pounds.