Government debt help schemes and solutions

Many fee-charging debt management companies advertise using phrases such ‘government debt help schemes’ or ‘government debt solutions’. You might have seen these adverts in search engines or on Facebook.

Please don’t be misled by these types of claims.

By describing their services as government debt help these companies’ adverts appear be authorised by the government. This isn’t the case and might result in your taking on a debt solution that isn’t the best option for you.

If you see an advert that talks about government help with debt it will usually be promoting a company that mostly manages individual voluntary arrangements (IVAs). As these solutions can only be managed by insolvency practitioners and fees are charged for their expertise, this is a way for companies to make money from helping people with debt problems.

There are a number of schemes that have been introduced to help people with childcare, paying energy bills and getting on the property ladder. There are no government help schemes for debt, but there are a number of ‘formal’ debt solutions with legal frameworks that have been introduced by the UK and Scottish governments.

Some debt solutions are informal agreements with your creditors, meaning there’s the flexibility to stop and start or change arrangements at any time. For formal debt solutions to succeed, certain conditions have to be met by the people in debt and their creditors.

Formal debt solutions introduced by UK governments

• Individual voluntary arrangement (England, Wales and Northern Ireland)
  An IVA is a type of insolvency. Make agreed payments to your debts, usually for five or six years, and at the end any unsecured debts are written off.
• Personal bankruptcy (England, Wales and Northern Ireland)
  Bankruptcy is type of insolvency that writes off your debt. Income and assets may be taken to pay off some of the debt.
• Sequestration (Scotland)
  In Scotland, sequestration, or full administration bankruptcy, works in a similar to the type of bankruptcy available across the rest of the UK. This is managed by the Accountancy in Bankruptcy.
• Minimal assets process (MAP) bankruptcy (Scotland)
  A type of bankruptcy in Scotland, MAP bankruptcy has been designed for people with fewer debts and assets.
• Debt payment programme (DPP) under the Debt Arrangement Scheme - DAS (Scotland Only)
  Make affordable monthly payments to your debts through DAS, similar to a debt management plan, but this is legally-binding.
• Debt relief order (England, Wales and Northern Ireland)
  If you qualify and your financial situation doesn’t change during the 12 months after you apply for a debt relief order, all debts included are written off.
• Protected trust deed (Scotland)
  You make reduced payments over four years through a protected trust deed. At the end of this time, your unsecured debts are usually written off.

The government has announced plans to introduce a breathing space scheme, officially called the Debt Respite Scheme, that we’ve campaigned for. This will mean creditors will be obliged to freeze interest and charges, along with pausing debt collection activity, when people tell them they’re struggling with debt problems.

If you successfully apply for and complete an insolvency solution, DRO or debt payment programme, the debts included will be written off at the end.

Creditors may write off debts if they believe there’s very little chance of you being able to repay them, although this is very rare. This could be because you’re unable to earn money on a long-term basis.

If you’re able to prove a creditor can’t enforce the debt, for example, if it is statute-barred, it isn’t written off even though it’s no longer enforced.

Find out more about debt write off.