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The Ins and Outs of Trust Deeds
If you are finding it difficult to manage your debts and struggling to live month to month, it is crucial that you take action to rectify the situation as quickly as possible. There are a number of routes you can take, with trust deeds one of the most popular options for people living in Scotland. A trust deed is designed to help you find a way out of debt by appointing an Insolvency Practitioner to act on your behalf when dealing with your creditors. This person will work with you to find the best solution for both you and your creditors by creating an affordable repayment plan that will enable you to write off part of your debt. This section is designed to help you understand how you can apply and what you must do, as well highlight how trust deeds work.
How does a Scottish Trust Deed Work?
A trust deed works by creating a repayment process designed to help you become free of your debt. Once you have decided to seek a trust deed, a Trustee will be appointed to deal with your case. After processing all your details, the Trustee will calculate how much you can afford to repay each month, as well as provide you with information regarding what it does and whether a trust deed will work for you. Your Trustee will then contact your creditors and inform them of your intentions to enter a trust deed. Your creditors will then have 5 weeks in which to raise any objections to the proposal. Once they have agreed to the terms or the 5 weeks have passed, your trust deed will be classed as ‘Protected’. This means that your creditors will no longer be able to take any further action against you and instead must communicate with you via the Trustee. You will then be required to adhere to the repayment plan and make monthly payments for the time agreed – approximately 48 months. Once this period is over you will be formally discharged from the agreement and you will be debt free.
Is a Trust Deed my best option?
Trust deeds are the best option for many as they are legally binding with your creditors and debt is usually cleared within 5-6 years. Assets can be kept and a payment structure is made that suits your situation. However a trust deed can be very strict and needs to be kept to. If it fails then there is a risk of bankruptcy. Certain professions can also be affected by insolvency, so check your contract of employment before going forward with a trust deed. Whether you’re accepted onto an trust deed or whether other options such as Debt Relief Orders (DRO) or Bankruptcy are better options, depends on certain criteria. Complete our quick online assessment to see which is best for you.Take our quick online test
How can I Qualify for a Trust Deed?
As with other debt prepayment programs, you must meet certain criteria before you can be accepted for a trust deed. The most important of these being:
- You are either currently or have very recently been a resident in Scotland
- You can prove that you are struggling to repay your debts to creditors
- Your personal debt is over £5,000. However, it should be noted that in some instances your debt will need to be more than this to be considered for a trust deed. Furthermore, if you are a couple, each of you must have individual debt of £5,000 or more to be considered.
If you meet these basic criteria, you will be allowed to move forward with your application. You will therefore be required to submit as much information and documentation as you can in relation to your debts and finance.
How much you can afford to pay each month is calculated by subtracting a reasonable amount of expenditure from your total income. However, if you have little assets or monthly disposable income it is likely that your application for a trust deed will be turned down. Alternatively, if your disposable income is found to be relatively high compared to your debt, it may also be decided that a trust deed is not appropriate for you. Furthermore, just like bankruptcy in the rest of the UK, trust deeds in Scotland are not available to certain professions, including some financial institutions and public bodies. These factors combined with the overall seriousness of this repayment plan means that it is recommended you get as much advice as possible so that you can answer the question ‘how does a protected trust deed work?’ before entering such an agreement.