A Trust Deed is a formal agreement between your and your unsecured creditors by which you can make repayments over a specified period. It’s legally binding and can be a viable alternative to filing for bankruptcy and can prove to be a highly effective form of debt management.
In order to establish a Trust Deed, a professional Debt Advisor will have to assess your financial situation, including income, expenditure and level of debt. They will help you to draw up a repayment plan, taking into account their estimate of the duration of repayment. Based on this information, they put a proposal together and present it to the creditors. Monthly payments are means tested and upon successful completion of the repayment schedule, any remaining debts are written off.
Upon acceptance of the proposal, creditors are no longer allowed to contact you directly and will freeze all further charges. A Trust Deed differs from a debt management plan, which is an informal agreement that where creditors could increase payment demands on their debtors. A common repayment period for a Trust Deed is three years, paying a single, low monthly payment.
In order to qualify for a Trust Deed, you must be a Scottish resident, having lived in Scotland for a minimum of six months. However, they may still qualify if Scotland was their chief country of residence at a previous point in their life. The minimum amount of debt required to qualify for a Trust Deed is based on your unique circumstances. Trust Deeds can only be comprised of unsecured debt, like credit and store cards and other unsecured loans.
Trust Deeds should reduce the overall pressure that comes with being in debt as the Trustee handles all correspondence from creditors. They are also offer you the right to hold public offices that bankruptcy would otherwise prohibit. It may even be possible for companies to continue trading and for individuals to retain their directorships of these licensed companies. Again, this is not possible with bankruptcy.
The Trustee agrees their fees with the lenders and receives payment from the Trustee throughout the arrangement. When the Trust Deed becomes protected, creditors can take no further action against the debtor. Lenders simply have to accept the balance of the Trust Fund account at the end of the three-year period as the full and final settlement of all outstanding debt.
In return for support in settlement of their debt, you agree to co-operate fully with the Trustee, paying the agreed monthly contribution while taking on no additional debts. It is also your responsibility to inform the Trustee of any windfalls. Trust Deeds may require the debtor to relinquish any equity in their property as well as declare any other assets and liabilities. A Trust Deed will also affect credit rating.
A Trust Deed is not the only alternative debt solution to declaring bankruptcy. Debtors may also wish to consider less formal arrangements, like a Debt Management Plan.