In today's economy many people are having great difficulty paying their bills. Through a loss of their job, a sickness, or a financial crisis many people are finding themselves on the edge of bankruptcy. An alternative, offered to the people of Scotland, is something called a "Trust Deed".
How Does a Trust Deed Work?
A Trust Deed is a voluntary agreement between an individual who is unable to pay his or her debts and a licensed Insolvency Practitioner (the Trustee). It allows you to pay as much of your debts as your assets and your monthly surplus income will allow. Trust Deeds normally last between three and five years.
The role of the Trustee is to present your Trust Deed proposals to your creditors and then administer the Trust Deed to its completion.
As long as no more than half or a third of your creditors object to your Trust Deed, then it will become protected. Once the Trust Deed is protected, your creditors cannot take further action against you or make you bankrupt. Once you've successfully completed your Trust Deed, you’ll be free from all debt included in it.
While the terms of a Debt Management Plan are informal, and creditors may increase their demands on you at any time, with a protected Trust Deed, interest and charges will be frozen for its duration.
How Do I Know A Trust Deed Will Work For A Situation?
The check list for entering into a Trust Deed is straightforward.
Only individuals residing in Scotland can enter into a Trust Deed Scotland
There's no set amount of debt or level of contribution required for a Trust Deed
Each Trust Deed proposal is treated individually, based on your own unique circumstances
Only unsecured debts can be included in a Trust Deed
What Makes a Trust Deed Better Than Other Debt Solutions?
For those with a large amount of unsecured debt, for whom a Debt Management Plan (DMP) or a Debt Payment Programme (DPP) may not offer a solution within a fixed timescale and for whom Sequestration (bankruptcy) may be too disruptive, a Protected Trust Deed offers financial freedom within the foreseeable future.
All interest and charges will be frozen
Pressure from creditors will be eased, as the Trustee deals with all correspondence and queries
A Trust Deed is usually more flexible than Sequestration. It also allows the individual to hold certain public offices, which may not be the case with sequestration
It may be possible for companies to continue trading and individuals to retain their directorships
Trust Deeds are not published in local newspapers
After you successfully complete the term of your Protected Trust Deed, you are free from all debt included in it
What Else Should I Know About Trust Deeds?
A Trust Deed will not be the ideal solution for everyone and you should consider all the implications before you enter into an agreement.
All assets and liabilities have to be declared. You may be required to release equity in your property and any assets of large value will need to be sold to raise funds
Entering a Trust Deed will affect your credit rating.
You need to stick carefully to a budget for the duration of your Trust Deed and your income and expenditure will be reviewed regularly during the Trust Deed.
Related articles
Get Help to Get out of Debt (50plusfinance.com)
How to Stay Clear of Debt (savealittlemoney.com)
What Do You Mean by a Secured Credit Card? (savealittlemoney.com)
Guiding your Recently Graduated Kids through Debt Management (50plusfinance.com)
