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Tools For Survival

The first thing to do is

1. Find out how much you owe in total.

It seems simple, but the first thing to do is work out how much you owe. Its the easiest thing in the world to fear to open the envelopes and sit them under the bed. In addition to this, when debt gets harder to manage (and harder for the creditor to collect) they will pass it on to a debt collection agency typically. This means conceivably you could be getting chased for the same debt by two or more different companies.

2. Work out your Income and Expenditure

The other side of the equation comes next: how much do you earn and how much do you spend on stuff not outwith paying off the monthly instalments of debt (but do include your mortgage or rent). The surplus is how much you have left available for your creditors.

3. How long will it take to pay back?

Then, divide your total unsecured debt (i.e your loans and credit cards) by this figure. This will give you the number of months you will need to be debt free assuming that all the interest stops.

Once you've got that then you can assess whether

1. you can pay back the debts in full (with the interest frozen), but over a longer period of time


2) you need some form of "debt reduction" (i.e you'll only pay back a proportion of what you can afford in full settlement of the debt.

Every case is different, but if the time to repay in full is upwards of 5 years it becomes more likely that option 2 becomes more attractive.

Tools for Surviving Debt

OK, once you have established your position you then need to consider what are the best tools for you. Below is a quick summary of the tools available to get out of debt with some pros and cons to each.

The first two involve some form of "debt forgiveness" - i.e only a portion of the debts are paid back, the rest are written off.

Protected Trust Deeds

One of the most popular ways of getting out of debt, due to the fact that you pay a monthly affordable contribution which, after three years, is divided up amongst the creditors in full and final settlement. It's still a form of insolvency, but its less serious than full blown bankruptcy, known as sequestration in Scotland.

See our Trust Deed section for more information.


Sequestration involves handing over your assets to a trustee who manage them on your behalf. The problem is that in order to qualify you need to be "apparently insolvent". Since April 2008 a new form of sequestration called Low Income Low Asset or LILA Sequestration has been introduced to try and widen the qualification to sequestration.

Find out more about sequestration here

Debt Management Plans

Debt Arrangement Schemes and Debt Management Plans, involve repaying the full debt amount (normally with interest frozen), over an agreed period of time.

Find out more about Debt Management Plans here