The Money and Pensions Service expects the demand for debt advice to increase by up to 60% by the end of 2021 and this is likely to lead to an increase in the need for debt relief.
In August 2020 Citizens Advice estimated that 6 million UK adults have fallen behind on at least one household bill during the pandemic, with 20% of those who have fallen behind on their bills unable to afford household essentials.
An estimated 3,000,000 more people than before the pandemic will need support with problem debt by the end of 2021.
As a result, proposals have been outlined by the UK government to increase the financial eligibility criteria for Debt Relief Orders (DROs) – the English, Welsh and North Irish equivalent of the Scottish Minimal Asset Process route to bankruptcy. (MAP)
A DRO/MAP is a route into bankruptcy (Sequestration in Scotland) for people who have problem debt and who also have a low income, with little or no assets.
The aim of the proposed changes is to help more people deal with financial difficulties and to achieve a fresh start.
The UK government is publicly consulting on changing the eligibility criteria to enter into a DRO to:
- Increase the total amount of debt allowable to £30,000 (from £20,000)
- Increase the value of assets owned by the individual to £2,000 (from £1,000)
- Increase the level of surplus income to £100 (from £50) per month
NOTE: For more information on how the Minimal Asset Process route to Sequestration works, please read our MAP guide.
Kwasi Kwarteng, Business Secretary said:
“Suffering from financial difficulties places a huge amount of stress on people’s mental health and wellbeing, which is why we are committed to giving more people who are struggling with debt a chance for a fresh start.
Debt Relief Orders are a valuable tool for supporting vulnerable people to get to grips with their problem debts.
Our plans to increase the eligibility criteria will mean many thousands more could benefit from this help.”
Trust Deed Scotland® further advised:
“Many people in the rest of the UK stand to benefit from the proposed changes, at a time when they are most needed, especially as it’s likely that the additional £20 per week payment made available via Universal Credit will be discontinued.
In Scotland, thanks to changes already passed as part of the Coronavirus Bill in 2020, MAP application fees had already been reduced or waived for people with the lowest incomes and the qualifying debt ceiling limit has also increased.
However, thanks to additional Statutory Moratorium support that was also passed as legislation in 2020, and more recently, we now also have the option to offer a Low and Grow payment plans in Scotland. Find out more about What is a Statutory Moratorium.
The Low and Grow DAS process allow individuals to make minimum or token payments through DAS with a view to increasing them when their income returns to a normal level.
We are hopeful that for people struggling with debt throughout the rest of the UK, they too can benefit from the proposed changes should Payment Breaks and Tailored Support offered by creditors not be enough to resolve their finances difficulties.”
If you are experiencing financial difficulties and are also affected by a drop in your regular income, you can find out more about your options including Statutory Moratoriums, MAP and Low and Grow DAS by calling our advice team on 0141 221 0999.
Alternatively, if you are experiencing financial difficulties but continue to receive a regular income, you can find out more about Trust Deeds, and the Debt Arrangement Scheme which allows you to manage your unaffordable debt by significantly reducing your monthly creditor payment obligations, freezing your interest and charges and reducing creditor contact.
Can I apply for MAP?
To apply for Minimal Asset Process Sequestration, you must meet the following conditions:
- You must owe a total debt of at least £1,500.
- You must not owe more than £25,000 (This may / may not revert back to £17,000 after March 31 2021).
- You do not own a single asset worth over £1,000 (this excludes a vehicle which does not exceed £3,000 and is reasonably required).
- The total value of assets does not exceed £2,000.
- You must have received advice from an Approved Money Adviser.
- You must be living in Scotland or have lived in Scotland within the last 12 months.
- You must not have been made bankrupt in the last five years.
- You must not have been made bankrupt through the Minimal Asset Process within the last 10 years.
- You must pay the reduced application fee of £50 to the AiB (This may / may not continue to be reduced/waived after March 31 2021).
- You must have a certificate for sequestration signed by an authorised person
- You must have been in receipt of benefits only, for the last six months; or
- A money adviser has assessed your income and expenditure using the common financial tool and you have no surplus to pay a debtor’s contribution.
- You do not own any land or property.
About Trust Deed Scotland®
Our experienced debt advice team have helped over 25,000 people in Scotland get their ﬁnances back on track.
As well as advice on MAP, we offer formal Scottish debt solutions such as Protected Trust Deeds and the Debt Arrangement Scheme.
With over 4,000 5/5 reviews, we’re rated No.1 in Trustpilot’s debt relief service category.
Call us on 0141 221 0999 for friendly, non-judgemental debt advice or complete our online form today.