Debt and depression

We’ve recently seen the latest insolvency figures for Scotland, showing us how many people entered bankruptcy (2,852) or a Protected Trust Deed (2,526) between July and September.

The latest figures for England and Wales aren’t available just yet, but an article published on the BBC’s website has suggested that financial worries may be linked to a recent rise in depression in England.

Data from the Department of Health revealed that there has been a considerable increase in the number of prescriptions for anti-depressants over the last four years. At the same time, charities and GPs say they’ve been seeing more people with serious concerns about their job security and debt.

They said that ‘financial woe’ could often act as a “trigger” for depression, but other factors are thought to be playing a role as well.

It’s often the case that the sooner an individual seeks professional debt help, the sooner they can get back on track with their finances - which could reduce the risk of them suffering from depression. But the question is, what help is actually available to people struggling with their debts?

Debt help in England

Residents of England, Northern Ireland and Wales who are struggling with their debts may be eligible for a solution known as an IVA (Individual Voluntary Arrangement).

An IVA is a formal debt solution in which a borrower will repay as much of their unsecured debt as they can afford within an agreed timeframe. It will usually last for five years, and providing a borrower continues to make their agreed payments for this time, the unsecured debt the borrower can’t afford to repay will be written off (once the IVA has come to a successful end, of course).

Although an IVA will help to clear an individual’s debts, it will damage their credit rating for six years from the day it starts - affecting the cost and/or availability of credit for this time. It can also require them to release any equity in any property they own.

Debt help in Scotland

IVAs aren’t available in Scotland - but Protected Trust Deeds are. And in many ways, they are very similar to IVAs.

However, a Protected Trust Deed does have its differences - for example, a Protected Trust Deed has different application and acceptance procedures to an IVA and will (in most cases) last for three years instead of five.

Both debt solutions will allow an individual to repay their debts (and have the unsecured debt they can’t afford to repay written off upon successful completion) - and just like an IVA, a Protected Trust Deed will damage an individual’s credit rating and can require them to release equity from their property.

Note: the descriptions of debt solutions in this article do not provide a comprehensive overview of a borrower’s options. To find out more about each solution (and others that may be available), borrowers should seek professional debt advice.