A Trust Deed consolidates all of your unsecured debts including credit card, store card and personal loans, and consolidates all of your debts into one single, affordable monthly payment over a period of 36 months which is then shared amongst your creditors.
The amount payable is carefully calculated after assessing the debtor’s assets, income and living expenses and determining what they could reasonably afford to pay. This helps to ensure that the debtor never gets into any arrears or misses paying any of their priority commitments such as their mortgage or rent, car finance or utility bills.
Trust Deeds are a debt solution available to Scottish residents that, much like an IVA, forms a contractual agreement between a debtor and his/her creditors.
Available only to Scottish residents, a trust deed usually lasts for three years and, overseen by a licensed insolvency protection, forms a final debt settlement upon completion of the agreement.
1. The start of a trust deed.
To start a trust deed, you will be required to discuss your financial situation with a licensed insolvency practitioner (your Trustee). The practitioner will require information about your debts and whom you owe money to, as well as your current monthly income and outgoings. From this, you will both come to an agreement as to how much you can afford to repay each month whilst still paying your regular living expenses.
2. Contacting your creditors.
Once you have agreed and signed a trust deed with your insolvency practitioner, the Trustee will write to your creditors with details of the trust deed. If more than two thirds of your creditors agree to the terms, then it becomes a protected trust deed.
3. The protected trust deed.
Protected status legally prevents your creditors from taking any further action against you and also freezes any interest charges.
Throughout the life of trust deed, you will make the agreed monthly repayments to your trustee whilst continuing to pay your regular living expenses (mortgage or rent, utility bills, etc). Any correspondence that your creditors make with you should be done through the trustee.
At the end of the three year period, provided that it is completed as per the agreement, the trust deed is considered to be full and final settlement of the debt.
What are the advantages of a Trust Deed?
- Trust Deeds provide several benefits for those people struggling to keep up with their debt repayments.
- A Trust Deed will end any threatening letters or payment demands from your creditors. Instead, all correspondence between you and your creditors is handled by the trustee.
- A Trust Deed is usually more flexible and costs less to administer than sequestration (the seizing of property).
- Trust Deeds also allow the debtor to retain their job or business, even if they hold a position in public office or a company directorship whilst self-employed debtors can still continue to trade during the Trust Deed period.
Written By Tanya Forde