Dealing with your non-priority debts

​What are the options for dealing with my non-priority debts?

10 ways to clear your debt

In the Debt topics are of our website, we have a section that sets out 10 ways to clear your debt.  You can compare:

  • how big or small your debts must be to use each of these options;
  • what type of debt you can repay using each option; and
  • how long each option might last before you are debt-free.

There are different options for dealing with your non-priority debts depending on your circumstances.

Which option is right for you will depend on things such as your income, how much debt you have, your assets and whether you own your home. Your credit rating will normally be affected whatever option you decide to take. This means it may be difficult for you to get credit in the future.

Can I get credit again?

What if I have some money left to pay my creditors?

Pro-rata offers of payment

Pro-rata calculation

  • Step 1 – make a list of all your non-priority creditors and how much you owe each of them.
  • Step 2 – add up the total amount that you owe to your non-priority creditors.

You will then need to follow steps 3 and 4 for each non-priority debt.

  • Step 3 – multiply the amount you can afford to pay your non-priority creditors by the amount of debt that you owe an individual creditor.
  • Step 4 – then divide the figure worked out in ‘step 3’ by the total amount that you owe to all your non-priority creditors.

You can work out offers of payment based on a 'pro-rata distribution' of your available income. This means you offer all your creditors a fair share of what you can afford to pay. You also need to ask that any interest and charges are frozen. Our budget tool, Your budget, will work out pro-rata offers of payment to your creditors for you. The calculation is also shown here. Alternatively, contact us for advice.

You can write to your creditors, sending them a copy of your budget summary and ask them to agree to your offers of payment.

Pro-rata offers sample letter

Example  pro-rata calculation

Pat and Eva have worked out that they can afford to pay their non-priority creditors £107 every month. This is their surplus for non-priority creditors. 
 
Non-priority creditors​ ​Amount owed ​Monthly pro-rata offer ​Pro-rata calculation
​Newhome catalogue ​£918 ​£14
£107 x £918 ÷ £7,227 = 13.59 (rounded up to £14)
​Alphabet bank loan ​£2,842 ​£42 ​£107 x £2,842 ÷ £7,227 = £42.08 (rounded down to £42)
​Unicorn credit card ​£3,467 ​£51
​£107 x £3,467 ÷ £7,227 = £51.33 (rounded down to £51)
 
​Total owed to non-priority creditors = £7,227
Total amount for non-priority creditors = £107
 

You may be able to do this through  a debt payment plan under the Debt Arrangement Scheme or a free debt management plan.

The Debt Arrangement Scheme (DAS)

This is a Scottish Government scheme that gives you time to pay off your debts and gives you protection from your creditors. If you join DAS to agree a debt-payment programme, you will make one regular payment to go towards paying off all your debts. From 1 April 2015,the amount you will have to pay is worked out by a calculation based on the 'Common Financial Tool'. As long as you keep to the agreed payments, no further interest, fees or charges are added to your debts from the date that you make your application. Diligence or enforcement action to recover your debt is stopped once your details are placed on the DAS Register and creditors cannot start a bankruptcy petition.

Your debt payment programme can include both priority debts (such as rent and mortgage, business debts, council tax, gas and electricity) and non-priority debts (such as credit cards, loans, overdrafts, business debts and so on). All debts must be included. You usually need to have some money left over after your essential spending to be able to join a debt payment programme.

See our fact sheet:

Debt Arrangement Scheme (DAS).

From the date that you apply for a debt-payment plan, interest and charges are frozen. They will be written off if you keep to the debt-payment programme, but if the programme is cancelled (for example, because you have not kept up with the payments), interest and charges could start to apply again. Interest and charges that had been frozen could also be added back on to the debt. For more advice about DAS and the protection you can get, contact us for advice.

Some types of business are able to apply for a debt-payment programme through DAS. If you are a sole trader, you can apply through a money adviser under the ordinary rules for individuals and couples. If you are trading as a different kind of business, you need to apply through an insolvency practitioner and special rules apply.

Free debt-management plan (DMP)

In Scotland, a DAS debt-payment programme is usually a much better option than a free debt-management plan because for example, interest and charges automatically stop. You can also include priority and non-priority creditors and you are protected from creditors taking enforcement action.

See our fact sheet:

Debt-management plans (DMPs).

Under a free debt-management plan you make one payment every month to cover all your non-priority debts. This will be divided up and sent to your creditors for you. You will not have to negotiate directly with your creditors to accept your offers and freeze the interest. This is different to a DAS debt-payment programme, where creditors have to accept the level of payment and freeze interest and charges once the debt-payment programme has been approved.

If you would prefer a free debt-management plan, we may be able to help you set one up if:

  • you can afford to pay at least £5 to each of your debts; and
  • you can repay your debts within 10 years.