Debt has always been something of a double-edged sword. It is an integral part of life, in that the vast majority of us use credit cards and store cards, or take out loans for cars, mortgages and other ‘big ticket’ items.

However, as Chris Malloch, head of debt management specialists, Cleanslate notes, there is a world of difference between debt that is being managed comfortably, and debt that turns into a crushing burden.

“When debt becomes unmanageable, it can have a huge impact upon every aspect of life, including one’s physical and mental health. Unfortunately, it often takes a crisis moment before people reach out for help,” he says.

The Herald: Cleanslate's Chris Malloch

This understandable hesitancy is unfortunate because there is much that can be done to reset a person’s debt position to make repayments genuinely affordable. This means that those who delay getting help may be subjecting themselves to a lot of avoidable stress.

Malloch points out that many people, particularly those on middle incomes, are fearful of solutions that involve bankruptcy, or sequestration, as the Scottish legal term has it. Sometimes, of course, bankruptcy can be the right solution.

However, Scotland offers people struggling with debt two other options to bankruptcy. The first is a Debt Arrangement Scheme or DAS, the second is a Protected Trust Deed.

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Simply put, a DAS totals up all a person’s unsecured debts and works out an affordable repayment that can run over, typically, anything from one to ten years. It can stretch over an even longer period if creditors agree to it, Malloch notes, but the problem with really stretching things out is that the future is uncertain. Anything can happen.

What is affordable now, might not be affordable in 10 years if someone’s health deteriorates, for example.

Under a DAS you are agreeing to pay all that you owe by the end of the agreed period. The advantage it offers is that it can massively reduce the bite that debt repayments are taking out of a person’s income.

Payments are based purely on what you can genuinely afford in a given month and it’s not uncommon for monthly debt repayments of more than £1,000 to be reduced to £300, or even lower as repayment is stretched over a longer, more manageable period.

One of the main differences between a DAS and a Protected Trust Deed is that the latter is applicable when it is clear that a person really has more debt than they can be expected to repay.

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The agreement with creditors here works out what someone could sensibly repay, typically over a four-year period, and once completed the rest of the debt is written off. It does however also need to take into account any assets which someone owns, so is not suitable in all circumstances.

“What makes DAS such a great solution for both the debtor and his or her creditors, is that it is a win for both parties. The creditors are repaid over time, and the individual concerned gets a repayment schedule that is carefully calibrated to be within their means,” he notes.

Another really important feature of DAS is that all interest due on the debt is frozen and is not part of the monthly repayments. This, in itself, can dramatically lower the total sum to be paid compared to maintaining the contractual payments. Moreover, when the DAS is completed, all the outstanding interest is written off. With some types of debt accruing interest in excess of 40% per annum, there is a huge advantage to being able to set this interest aside.

On top of this, once someone enters into a DAS their property is protected as long as they maintain their mortgage payments. They have the comfort of knowing that their creditors are not going to force the sale of any of their assets, as long as they maintain and successfully complete all repayments under the DAS.

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“One of the most common pieces of feedback we receive from clients who have accessed a formal debt solution is one of intense relief. So, whilst the journey to address and resolve the debt might take a few years, the emotional benefit the client experiences can be immediate.

“For example, we often hear a client say, “I’ve just had my first decent night’s sleep in ages!”  The relief that comes from knowing that a tailored plan has been created and put in place can literally change someone’s life in the most positive way.”

“I’ve worked in this sector for 17 years and the positive impact we have on a daily basis is what gets me out of bed in the morning,” Malloch says.

DAS is a great scheme for those who can repay their debts, but just need the breathing space to do so.  By consolidating all unsecured debt repayments into one single, affordable monthly payment and with interest and charges frozen, debts which appeared impossible to repay can actually be tackled in a reasonable timescale.

As everyone knows, the UK is currently going through a real ‘cost of living’ crunch that has hit many Scots hard. Many who considered themselves to be on comfortable, middle-level incomes have found themselves struggling.

Malloch notes that over the last 2 years, he and his colleagues have seen an almost 20% rise in the average level of income of people entering DAS.  That’s a clear sign that middle incomes are feeling the squeeze, he says.

“My advice is always to reach out and seek advice as early as possible.  The sooner we can step in and help, the more options are likely to be available,” he concludes.

Want to talk to the Cleanslate professionals about managing your debt? Then click www.cleanslate.co.uk