Although one reads in the media about a lower level of unemployment than the Government had anticipated and a relatively positive economic outlook, the number of queries received by the Meston Reid & Co insolvency team “ the team “ suggests that there are plenty people who have either been made redundant following the end of the furlough period, are in low paid jobs such that the increasing cost of living is causing concern, or are worried generally about their financial position.

Very few people wish to experience financial difficulty but it can happen quite easily and quickly, often as a result of matters outwith one’s control.  Equally, as Christmas looms ahead, there is a natural tendency in many of us to spend more than is affordable.  Managing one’s debt burden can be stressful, complicated and embarrassing and the team often find that those who contact the firm have already been surfing the net in order to seek answers.  Invariably, this is because of the wish to try and find answers to questions without exposing personal frailty to others.  The difficulty is often that many  websites refer to bankruptcy procedures in England and hence, explain the implications of the Insolvency Act 1986, whereas Scotland uses different legislation : the Bankruptcy (Scotland) Act 2016.  Further, each situation has its own idiosyncrasies and it is rare to find someone in financial distress who can look at their position dispassionately.

When the team is consulted, the types of options that are explained/considered include :

1. Debt Arrangement Scheme
2. Trust Deed
3. Bankruptcy
4. Debt consolidation
5. Informal debt repayment programme

Each option has its advantages/disadvantages which means that the team will ask various questions in order to determine the suitability of each option.

Whether it is a telephone interview or physical meeting, it takes time to allow an individual to feel sufficiently relaxed/trusting in order to provide full responses to questions and perhaps unsurprisingly, not all of the answers will point to a perfect solution i.e. an element of decision-making is necessary. Further, when consulted, the team consultant will generally wish to be positioned in broadly neutral territory in order to consider the situation from all angles. A balanced view is required.

Frequently asked questions include :

1. Does it matter if my credit card liabilities are joint with my partner or solely in my name?
2. My partner and I own our home and are worried that it might be repossessed/sold. If my home is at risk, what can I do to protect it and with whom do I negotiate?
3. Will I lose my job if I enter a formal insolvency process?
4. Is there a public record that will show that I have entered a formal insolvency process i.e. who will find out?
5. Will someone come to my house and remove the contents for sale?
6. Can I have a bank account if I have been sequestrated and use it for my ongoing employment?
7. Can I be self employed after I have been sequestrated and if not, why not?
8. How long will a period of formal insolvency last and is there anyone in authority who oversees the process?
9. If I am self employed, will my business assets be removed and sold?
10. Are any debts excluded from the sequestration process that I must still pay?
11. If I am earning, do I have to pay a contribution towards my creditors?
12. If I have to pay a contribution, how is it calculated and monitored, and to whom is it paid?
13. Will I have to sell my car and if so, how I am expected to get to work?

These are merely examples of the type of question for which an answer is sought and explains why, despite the various options available for dealing with personal financial difficulty, until one knows the detailed circumstances of a person’s situation it is impossible to answer questions fully and create an action plan.

Experience suggests that one should ignore the adverts about “deleting debt” and “avoid paying all your creditors”. The Meston Reid & Co experience is that many individuals regret becoming involved with unknown/distant debt advisors who do not hold a consumer credit licence, who are not sufficiently experienced to provide appropriate advice, or do not have accreditation e.g. licensed insolvency practitioner, and may well have an interest in steering the person towards a product that is more beneficial to the advisor than the person seeking help.  When responding to internet and press adverts, it is important to check the credentials of whoever is offering advice, no matter how suave and knowledgeable they may sound.

In reality, there is no substitute for seeking advice from an experienced source as soon as possible in order that you can become knowledgeable about your circumstances/options and formulate a plan that deals with the situation in a practical manner. A meeting is usually better than an exchange of e-mails and texts. Don’t be afraid to seek advice from a reputable source and just as importantly, don’t wait until it is too late for you.

The views in this article are those of Michael J M Reid, licensed insolvency practitioner and partner of Meston Reid & Co, chartered accountants, Aberdeen.  They do not purport to represent those of the firm in general.