Bankruptcy can provide a route out of overwhelming debt

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Bankruptcy can provide a route out of overwhelming debtIt’s not something that I would ever have anticipated saying but going bankrupt was an incredible relief for me. Declaring bankruptcy is certainly a serious situation, there’s a detailed legal process to go through and there are implications for your finances over the course of the following six years but my principal feeling after the initial procedures and official registration was one of overwhelming relief.

I had always borrowed money in one format or another. I had an overdraft facility, a credit card and a couple of charge cards. There would be times when I would dip into my overdraft and times when I would go a bit heavy on the cards but it was always very manageable and there were many times when they were all clear.

Hindsight’s a great thing

Looking back on things I can clearly see now just exactly what happened and how it happened. I had taken on a new job and the company was full of people my age many of whom I got to know and got on really well with. My social life and activities just deemed to really expand. I was going out more, eating out more, I joined an up market health club and I found myself buying more clothes and sportswear. I also bought myself a new car. My lifestyle had changed and it was great, I was really enjoying myself.

Over a period of about twelve months, I hardly even noticed that I was increasing my debt across the board, overusing my cards and often using what was then an increased overdraft facility. I had also committed to additional direct debits such as the gym membership, new mobile phone plan and a few online subscriptions.

It can happen any time

Then disaster struck, the company lost some big orders and had to cut back and it was a case of last in first to go. So I lost my job. I was out of work for about seven months and the best job I could get was paying much less than I was previously earning. Things were really difficult when I wasn’t working and the extent of my more expensive lifestyle really came home to roost. The only option I could see at the time was to use my existing credit facilities to get by, and so my debt simply increased. Once I started working again I borrowed even more just to get over what I thought would be a short term problem.

Borrowing money to get out of debt doesn’t make sense and is not the answer, I know that now. Missing payments, incurring penalty charges, bouncing cheques, returned direct debits all become a downward spiral. The lender demands, constant phone calls, debt collectors at the door is a nightmare. The sleepless nights and constant worry is a terrible place to be in your life. The feelings of helplessness and hopelessness make it difficult to cope and even think straight.

Finding the solution

One of the few friends I could confide in took the initiative and made an appointment for me to see a debt advisor and thank goodness he did. I was up to my eyes in debt and didn’t know what to do. They advisor certainly did know what to do. She assessed my total debt and prepared an income and expenditure statement along with a valuation of my assets. It wasn’t a pretty picture. I was insolvent and was advised the best option was to declare myself bankrupt. It’s important to get professional bankruptcy advice.

The bankruptcy procedure is actually a relatively straight forward process and it allowed me to agree a payment I could afford to my creditors each month for the following five years and then write off the rest of my debt. It was the only way out and I was glad to take it and get back to some kind of normality. It’s not easy during the bankruptcy period but you adjust to what’s required and get on with it. But just knowing there was light at the end of the tunnel made it all worthwhile.

Write off debt with a Scottish Trust Deed

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Write off debt with a Scottish Trust DeedI don’t think there are many people who take on debt with the intention of never repaying it. I’m sure it does actually happen but can’t believe for a second that it is a common occurrence. And anyway I’m pretty certain the banks and card companies have protective measures in place to ensure it is not widespread.

So when most people experience debt problems there is likely to be a real life reason for it. It may be a drop in income as can happen when someone loses their job, or goes through a long term illness. It can even be an unexpected expense that can tip the balance of financial management the wrong way. Or it can sneak up on people; you get a bit more in debt each month, miss a few payments, incur expensive penalties and charges and then you find yourself in over your head. And there are people who really just find it difficult to manage their finances or are even reckless with the debt they take on.

Personal experience

I speak from personal experience having incurred a substantial debt problem, which happened to be through the loss of my partner’s job, and we found ourselves very quickly in financial difficulty and not coping well with it. The first thing we did was to take on more debt to try to solve our immediate debt problem. Now how stupid is that. We can look back now and see where we went wrong, on numerous occasions, but our pattern of behaviour was typical of how many people react to the problem.

Logic and rationale go out of the window as emotions kick in. Worry, anxiety, embarrassment, deceit and fear make it difficult to think straight and even contemplate a solution.

Taking action

A search on the internet took me to a website that rang a big bell in my head. It made sense of it all and provided me with the information I needed. But the one thing it certainly did was to make me realise I needed help, professional help, professional debt help. And that is exactly what I did. I took action and lifted the phone and asked for help with my problem. All of a sudden I didn’t feel quite so alone. The advisor was friendly, helpful and most importantly knew exactly what to do.

She listened to my problem, took me through a detailed assessment of my financial circumstances and recommended that I entered into a formal debt solution that I had never heard of before called a Scottish Protected Trust Deed. One thing to remember about debt solutions is that they have disadvantages as well as advantages and these were explained to me in detail.

The right decision

Once I had been given the Trust Deed advice it was relatively easy to make the decision that this was the right debt solution for me. An affordable monthly payment was agreed with my creditors and this lasted for three years and at the end of this period the rest of my debt was written off. It wasn’t easy going through those three years but it was a huge weight off my shoulders. The details of the Trust Deed stayed on my credit record for six years and whilst it was difficult to get finance it wasn’t impossible.

The solution worked for me, it was a lesson learned, and my Trust Deed gave me a route out of debt and the opportunity for a fresh start.

Scottish Trust Deed advice and help

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Trust deedA Trust Deed is a debt solution for people living in Scotland which has been designed to help people manage their debt by paying a single affordable payment to their creditors over a period which usually lasts four years and at the end of the agreement the remainder of their unsecured debt is written off. It is an alternative to bankruptcy, or sequestration, as it is known in Scotland and provides a way for people to clear their debts and make a fresh start.

The practicalities of a Trust Deed

This first thing required is to ascertain if a Scottish Trust Deed is the right solution for you and whether you will qualify for one. There is a whole host of information available on Scottish Trust Deeds but the best way to start off is to seek advice from a professional debt advisor.

There is a variety of debt solutions available and it is important that you select the one that is most suitable for your own particular circumstances as they are likely to be unique to you. On top of this you will find that the criteria for qualifying for different debt solutions and the legislation surrounding them, continues to change. At the time of writing there has, only recently, been some significant changes by the Scottish Government on how Trust Deeds will be operated and administered. These mostly relate to transparency and changes in the method of charging by the Trustees who administer the Trust Deed along with changes designed to create a fairer balance between the interests of debtors and creditors.

A Scottish Trust Deed is a legally binding process and must be administered by a licensed Insolvency Practitioner who would normally be appointed as the Trustee and becomes responsible for ensuring all aspects of the process are carried out according to the legal guidelines.

Creditors’ proposal

The next stage of the Trust Deed process is to make a proposal to your creditors which effectively sets out what you propose to repay and how much of your debt you are requesting to be written off. This is undertaken by the Insolvency Practitioner who will go through your financial circumstances and prepare the proposal from there.

If your creditors accept the proposal then the Trust Deed can be put in place. An important point at this stage is for the Trust Deed to become a Protected Trust Deed which then means that your creditors are legally bound by it and can no longer pursue you or take legal action against you. Under the recent legislation changes Trust Deeds now become protected when they are registered on the Register of Insolvencies.

Advice for homeowners

It is important to realise that if you are a home owner there are specific rules and guidelines in relation to whether or not your home can be protected or if it has to be sold. There are options for a home to be exempt from a Trust Deed and options for releasing the equity of the person entering the Trust Deed to enable the family home to be protected. This is a crucial point where you should seek advice on Trust Deeds from a professional debt advisor before starting the process.

If you abide by the rules of the trust deed for the stipulated period then you can be debt free at the end of it and make a fresh start with your finances.

The emotional turmoil of struggling with debt

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Struggling with debtStruggling with excessive or severe debt can take a serious emotional toll that is often not recognised or dealt with as the substantive problem it can be. Individuals and families can find themselves dealing with rising debt and increasing difficulty in making ends meet and so face a challenging situation that may result in far greater emotional stress than the financial stress they are experiencing. Seeking out professional advice, assistance and guidance to help you manage both your financial situation and any emotional issues that your debt may be causing is an important part of the process of resolving the problem. The advice and assistance that experienced professionals can provide can make all the difference in dealing with the problem and starting on the road to resolution and improvement.

Taking steps to manage your debt

Basic efforts, like constructing a more effective personal budget and creating a long term financial plan, can make a great deal of difference in your efforts to better manage your finances and reduce your debt. For those who are inexperienced in financial management techniques or who just struggle to plan and budget then taking advice from an expert debt advisor can be extremely beneficial. There are some simple tips and strategies that really can help to reduce debt levels and importantly keep them down.

Common issues and problems caused by debt

Personal and emotional issues can be far more difficult to deal with for those who are struggling financially and in the midst of the pressures and anxiety that debt can cause. Psychological and emotional problems such as low self-esteem, depression and compulsive behaviour that can negatively affect anyone’s life can become even more acute for those who are having difficulty paying their bills, meeting their financial commitments or dealing with the demands of lenders. Learning to recognise the signs of mental stress and knowing where to seek help is a crucial element in the struggle to improve your current situation and find a way out of the debt problems you have.

Seeking professional help

There is a wide range of resource available for help and advice on financial guidance and debt management services as well as psychological and emotional support to help you better manage your situation. Attempting to deal with the situation on your own, which is the route that most people take, can not only be the more difficult option but can also hinder your efforts to improve your circumstances. Deciding to seek assistance can provide you with the resource, insight and understanding needed to ensure you make the right decision and choose the best option for you own particular circumstances.

Overcoming your debt and creating a brighter future

Dealing with financial problems and the burden of debt can be a difficult and emotionally challenging task. It’s important to break down the problem into manageable chunks and to have a practical plan of how to work through the various stages towards the best debt solution. The key is to take action whether that is to seek advice or to resolve the problems on your own. Recognising the emotional turmoil that so often manifests itself as part of the process is crucial to keeping things in perspective and giving yourself the best chance of a successful solution. It’s all about improving your situation and moving on to a brighter and better future.

Is there life after bankruptcy?

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Is there life after bankruptcy? Declaring bankruptcy is a serious life decision. For many, bankruptcy might seem like the end of a person’s financial life. However, this is not true. Bankruptcy might be a very serious consequence to financial actions, but it does not spell the end of a person’s financial future. There are still many ways to improve your financial standing after a bankruptcy and rebound from its effects. Yes, there is life after bankruptcy.

What happens after declaring?

When you formally declare bankruptcy, you are stating that you are unable to repay your debts and that you need to enter into a formal agreement with your creditors for you to make a monthly repayment that you can reasonably afford, and then for the rest of your debt to be written off. The period of bankruptcy will also mean restrictions on your financial freedom. When you declare bankruptcy, you must follow your bankruptcy plan or face further restrictions. Whilst you may be discharged from your bankruptcy after a year, your repayments can last for three years.

What must be accepted?

Your life may appear very structured after declaring bankruptcy. Your assets are used to pay off your creditors and you must continue with the agreed contribution from your income which usually lasts for three years, so consumption and investments may seem impossible to fulfil. Living within the budget established is necessary: food, utilities, and shelter must be a bare minimum. Gaining new credit during your bankruptcy is restricted and for example you are unable to operate as a Company Director. The bankruptcy itself is a mark on your financial record for six years. Accepting this, not wallowing in pity, is extremely important if you want to take your life back.

When to Start Rebuilding

The first step is following through with the bankruptcy rules and ensuring all the terms are abided by and there are no problems. Your bankruptcy discharge will normally be made after twelve months and this is the point when you are legally freed from the bankruptcy order. You must realise however that you will probably still have a commitment to make monthly repayments to your creditors for a further two years and you must ensure this is done so you have no further problems. After your bankruptcy discharge your credit file will still show that you have been made bankrupt for a further five years. You will almost certainly be unable to get a mortgage immediately after discharge but there are some options available to you on the credit front. Pre-pay credit cards can be used relatively quickly and over the course of a number of months you will find that there are impaired credit lenders who will consider credit on an individual basis.

How to Rebuild

Maintaining the behaviour and discipline you had during your bankruptcy is actually the key to fiscal success. Living within your means and within a budget, paying bills by their deadlines, and ensuring you pay off credit or debt on time will bode well with lenders after your discharge. It’s all about living within your means. Make cautious and safe investments and control your spending habits.

There is Hope

Never give up hope. Bankruptcy is a very hard decision to make and can be extremely stressful and emotionally draining. But, if you work hard, you can come out of your bankruptcy financially strong and prudent, and importantly, able to make a fresh start free of debt.

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