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The Four Nations Debt Challenge: which is the most consumer-friendly?


The Four Nations Debt Challenge: which is the most consumer-friendly?

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At Creditfix this week, we ask of the four nations of the United Kingdom, which have the most consumer-friendly systems for dealing with unmanageable debts? 


Although part of the United Kingdom, Scotland has always had its own distinct legal system, which is the least like the other legal systems of the UK.

The first to modernise their debt law in 1985, the formal solutions in Scotland are Sequestration, Protected Trust Deeds, and the Debt Arrangement Scheme.


Sequestration is the name for bankruptcy in Scotland. It was the first system to introduce a simpler form of the procedure for low income debtors known as Low Income, Low Asset bankruptcies.  This process, however, has now been replaced with the Minimum Asset Procedure (MAP), which is like Debt Relief Orders which are available in the rest of the UK.

In Scotland MAP bankruptcies only last six months, meaning they are the shortest form of bankruptcy available in the UK.

The cost of applying for sequestration in Scotland is only £200, significantly less than that in England, Wales, and Northern Ireland.  If you do need to pay something, however, you need to pay for 4 years rather than 3, meaning you pay for longer over the course of your bankruptcy.

For more information on sequestration, see here.

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Protected Trust Deeds

Broadly like an Individual Voluntary Arrangement (IVA) in England, Wales and Northern Ireland, Trust Deeds in Scotland were the first non-bankruptcy form of personal insolvency in the UK and originate back hundreds of years.

However, whereas IVAs have a protocol underpinning them which has been agreed by creditors, trust deeds are heavily based on regulations and trust law, which means they are not as flexible as IVAs, particularly when dealing with a consumer’s home.

For more information on Trust Deeds, see here.

Debt Arrangement Scheme

The Debt Arrangement Scheme is unique and allows people to repay their debts in full, allowing them to avoid personal insolvency. It is a type of debt management.

However, it is a heavily regulated Scheme and for that reason not as flexible as Debt Management Plans which are more widely used elsewhere in the UK.

It does have some big advantages in that it can avoid consumers being made bankrupt.

For more information on the Debt Arrangement Scheme, see here.

Our view: At Creditfix, due to recent changes to sequestration, trust deeds and the Debt Arrangement Scheme, we believe Scotland has now slid down the consumer-friendly scale. Consumers in Scotland are now paying more and for longer.

England, Wales, and Northern Ireland

In terms of debt law, England, Wales, and Northern Ireland count effectively as one, though Northern Ireland can have some variations.

The three main formal remedies available are bankruptcy, Individual Voluntary Arrangements, and Debt Relief Orders.


Bankruptcy is still a court based remedy, unlike in Scotland, where an application is made directly to the Accountant in Bankruptcy.

However, one year bankruptcy was introduced in these countries almost 5 years earlier than it was introduced in Scotland.

The cost of applying for bankruptcy is more than it is in Scotland. In England and Wales the application fee is £130 and the bankruptcy fee is £550. It, therefore, costs £680. In Northern Ireland, it’s slightly less (the deposit fee is £550, the application fee £115, and there is a £7 solicitor’s fee). The total cost is £672.

Unlike Scotland, the length of time you pay in these countries is only 3 years, meaning if you do have to pay something, the likelihood is you will pay less towards your bankruptcy overall.

For more information on bankruptcy, see here.

Individual Voluntary Arrangements

A voluntary type of personal insolvency that is not bankruptcy, IVAs are contractual arrangements you enter with your creditors’ agreement, but are underpinned by legislation.

They are very flexible as they are based on making an offer to your creditors and if they are accepted by 90% of them, are legally binding. There is even an industry level agreement between creditors which outlines what is acceptable and what isn’t, but this allows flexibility in relation to how your home is treated in the Arrangement.

For more information on Individual Voluntary Arrangements, see here.

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Debt Relief Orders

Sometimes described as a mini-type of bankruptcy, Debt Relief Orders were introduced into England and Wales in 2009 and Northern Ireland in 2011. They don’t involve the courts and only cost £90. Ideal for people who don’t own their home and have low levels of debt and income.  Scotland has recently taken a similar approach with its Minimum Asset Procedure, however, Scotland’s MAP is not as accessible as a DRO, and, therefore, not as consumer friendly.

For more information on Debt Relief Orders, see here.

Our view:  Although the bankruptcy processes are still court based and more expensive to access than in Scotland, consumers don’t pay for as long and, therefore as much.  A Debt Relief Order is also available to more consumers than Scotland’s Minimum Asset Procedure is because of changes introduced in 2015.

Individual Voluntary Arrangements are also a practical alternative to bankruptcy and more flexible in how they deal with consumer homes, meaning whereas someone in Scotland may enter the Debt Arrangement Scheme to protect their home, someone in England, Wales or Northern Ireland may use an IVA to deal with their debts, meaning they pay less overall.

In Conclusion:

We believe that the solutions available for dealing with debts in the UK, outside Scotland, are now the most consumer-friendly overall. The rest of the UK still doesn’t have a formal remedy like the Debt Arrangement Scheme, but in Scotland over the last two years the numbers of consumers using this remedy have fallen by 50% and more are now using other formal and informal remedies like Debt Management Plans, which are also available in the England, Wales, and Northern Ireland.

The fact is debtors in Scotland now pay for longer in bankruptcy than others do elsewhere in the UK; whilst Protected Trust Deeds are not as accessible as Individual Voluntary Arrangements, as the minimum amount that must be paid is often higher because of regulatory costs. They are also not as effective as IVAs in protecting homes, so consumers in Scotland are more likely to use other remedies like the Debt Arrangement Scheme.

This means overall, financially distressed consumers in Scotland are now paying for longer than consumers elsewhere in the UK.  In our test of which of the four nations has the most consumer-friendly system, the prize goes to England, Wales, and Northern Ireland.

If you need more information about the options available to you in dealing with your debt, you can always speak confidentially with one of our friendly advisors on 0808 2085 198.

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