What Is A Compulsory Liquidation?

Compulsory liquidations are common in business circles. They usually occur when creditors or the government asks a company to be liquidated. The reason for liquidation varies. In most cases, the creditors are usually seeking to bankrupt a company. The government, on the other hand, orders for this form of liquidation if a company is involved in tax fraud or has been carrying out fraudulent activities.

Process

Compulsory liquidations are not executed instantly. The process starts with either the government or creditors requesting for a court order to liquidate a company. If the court sees enough evidence to warrant liquidation, it compels the business to stop operations immediately. By ordering this form of liquidation, the court is able to ensure that all those who incurred damage are compensated and fines and any punitive damages are paid.

When is Compulsory Liquidation used?

This type of liquidation is normally used when a creditor is tired of waiting for their payment. So, he or she petitions to the court to get a wind up order. The minimum amount money owed that can allow one to file for insolvency is £750.

Winding-up Petition

The winding-up petition is a legal document that the creditor files to the court in order to start the process of winding up the company that owes them money. Once filed, the winding-up petition and a hearing date is formally advertised. This will lead to the freezing of all bank accounts that belong to the company.

Submitting a Winding-up Petition

To formally submit a winding-up petition, the creditor sends a written application to the court. The application must contain substantial evidence that the company in question is insolvent and is not paying their debts. It then takes 6 to 8 weeks before the hearing commences. During this period, the insolvent company can do several things to avoid compulsory liquidation. In order to successfully execute these options, the company must seek business debt advice from insolvency practitioners.

Who Performs Compulsory Liquidation?

This form of liquidation is a court directed procedure. Normally, an official receiver is selected from the court to do the winding up. The official receiver can decide to pass the case to an insolvency practitioner for them to liquidate the assets. The official receiver performs the rest of the winding up and carries out an investigation to determine the alleged insolvency of the company.

Alternatives

There are several alternatives to compulsory liquidation. They include:

  • Creditors Voluntary Liquidation
  • Company Voluntary Arrangement
  • Company Administration Process

These methods are more flexible and have less detrimental repercussions.

Avoiding Compulsory Liquidations

There are ways through which a company can avoid this form of liquidation. It can do so by acting quickly and seeking voluntary arrangements to pay the debts within a set timeframe. To know the best options that are available, the company needs to get business debt advice from professionals. This way the company can choose the right option.

Administration

Administration is usually the best option, especially if the company has a viable future and reliable cash flow. It ensures the company's survival by protecting its assets from creditors. This gives the company time to restructure and avoid termination. Compared to insolvency, administration does not offer great return to creditors. Moreover, it eliminates the possibility of any return. This increases unemployment and prevents the chance of building a successor business.

Act as Soon as Possible

The best way to deal with financial problems in a company is to act quickly. The company must get business debt advice as soon as they spot any problems, like decreasing cash flow and increased pressure from creditors. Through early detection, the company can take the necessary measures to avoid serious consequences such as liquidation.

During compulsory liquidations, the companies in question can get advice from a licensed insolvency practitioner. He or she offers advice about formal insolvency procedures and explains each insolvent winding-up process to make sure that the company directors are familiar with each of them before making a decision. Before hiring an insolvency practitioner, it is important to ensure that he or she is licensed. This is because there are some unlicensed professionals who offer misleading information. With the right information and advice, the company gets to avoid any extra costs during the procedure.

CVA (Company Voluntary Arrangements)

What is a CVA?

A CVA or Company Voluntary Arrangement is a common business recovery procedure for insolvent companies. This particular insolvency procedure enables a company that has debt problems or that has become insolvent to come to a voluntary agreement with its business creditors to structure the repayment of all or some of its financial debts over a stipulated length of time.

How Do They Work?

The first part of a CVA is the approval process, which normally takes about 28 days, but in some cases can be up to three months.

The approval process begins with the creditors being asked to take a vote whether or not they wish to accept the proposal. This usually takes place at a special Creditors' Meeting, although most votes are cast by proxy instead of the creditors being there in person. Seventy-five percent of unsecured creditors by value who vote must agree to it, as well as fifty percent of non-associated creditors, prior to any CVA being made binding. As a major creditor in the company insolvency, the insolvency practitioner must also approve the procedure.

When the CVA is approved, the company will make a monthly payment from the continuing trade profits. A company also has the option of selling some of it's assets to make these monthly payments. Under the purview of the appointed insolvency practitioner, the payments are then distributed to all the creditors, either on a monthly basis or as a lump sum.

How Can They Help You Manage Your Debt?

Business debt advice commonly recommends CVAs for a variety of reasons. First, debt deferral reduces cash flow pressure so that your business is not overwhelmed by growing, unsustainable debt. It also offers a far more realistic repayment structure than other debt management programs so that you pay what the company can manage without straining its finances more than they already are.

Creditors are also more likely to prefer a CVA because it offers them a much better option for recouping costs than flat out business closure or liquidation of assets. Another way this helps you manage your debt is freezing all of them so that there is no additional interest accumulating like it would normally. And at the end of the term of the CVA, the remainder of debt that hasn't been repaid is written off.

What are the Pros and Cons?

There are very many advantages to the Company Voluntary Advantage. The first advantage is that it's a very flexible business recovery procedure, while still being formal and legally binding. It's not indefinite, and it has a pre-defined agreed on timescale so that you have a clear path ahead. The business can continue its day to day operations and trade without having to change ownership, management, or lose its workforce. It costs far less than options like structured administration and liquidation. There is rarely any need to buy back or dispose of assets. The reduced strain of incoming cash flow and realistic payment timelines keeps unduly stress off the company.

The primary legal advantage is that it provides court protection to the business and places a moratorium on creditors raising further legal action. CVAs also offer the chance to reform and restructure the business — usually by removing unprofitable areas — while remaining under management's control with very little intervention, if any.

The main incentive for a company to choose to go down the Company Voluntary Arrangement channel is that it has a much greater prospect of salvaging the company. This has the dual benefit of saving jobs and also returning value to creditors and shareholders alike.

The only foreseeable disadvantages are the potential for possible liability and the chance that the entire procedure could take a very long time to be complete, which may not be desirable if you want to just abandon the company. Additionally, an insolvency practitioner could decline a Company Voluntary Arrangement if there has been a history of poor payment or lack of compliance.

You Should Know…

While a Company Voluntary Arrangement certainly creates a firm platform for rescuing a business in distress, it is immensely important to act as soon as possible. It is also important to note that all businesses and situations are different, and for individual cases it is always best to consult a business debt advice professional.

Millions Suffer as Council Supports Benefit Cuts

The Citizens Advice Bureau feel recent local authority benefit cuts are causing poverty, hardship and in some cases, financial ruin. This is the latest round of information offered by Simple Financial Solutions, a well-established debt advice company.

Nearly two and a half million people have been subjected to a substantial cut in their council tax support, in the attempt to reduce the annual benefits bill by half a billion pounds. The unemployed, the young and those on a low income face are those most affected, because the government has intervened to ensure the benefit cuts don't affect pensioners.

A recent Freedom of information request revealed that people most affected included 112,000 carers, 3,600 war widows and 409,000 disabled individuals.

People who fail to pay their council tax will be receiving a court summons and defaulters can be imprisoned if the arrears remain unpaid. So, effectively, we are criminalising the poor. Local records show that home evictions and bailiff visits owing to unpaid council tax are on the rise, and many are turning to the Citizens Advice Bureau and other debt advisers for advice.

However, the Joseph Rowntree Foundation has recently funded some research that was carried out by the New Policy Institute. The results show the local authorities who have charged higher “minimum” council tax payments and made the largest cuts are experiencing falling collection rates and incurring bigger arrears and court costs.

Many front line charities and services, including the Citizens Advice Bureau are struggling to meet demand for help and advice in the fallout from recent benefit cuts.

The Citizens Advice Bureau recognizes the economy looks brighter, but Gillian Guy (chief executive CAB) feels many people are still failing to meet their financial commitments. Three in five people are concerned about rising bills and many are reigning in their spending, so Gillian feel she is justified in saying people are still struggling to pay basic bills.

One out of every five people who contact the Citizens Advice Bureau is concerned about council tax debt and this appears to be the uppermost debt problem at this moment in time. In the wake of the recession, more are turning toward short-term, high cost credit to pay household bills.

A percentage of local authorities are unwilling to pass cuts to the local community and these authorities are viewed as unfeeling and uncooperative. Cheltenham Borough Council is one such authority, but this council is intent on finding other ways of bridging the financial gap.

John Rawson, a local councillor felt it was self-defeating to cut benefits to the poorest in the community. He said money would be wasted chasing small debts and it was impossible to get blood from a stone.

The debt Advice Company, Simple Financial Solutions and voluntary staff at the Citizens Advice Bureau say the problem is worsening. The benefits cuts were implemented eighteen months ago, but people are still struggling to live on less money.

Recent media reports state the economy is recovering, but the Citizens Advice Bureau state millions of households are still feeling the pinch. People are finding it difficult to afford food and to pay energy bills because wages are not rising in line with inflation. Meanwhile, local authorities and the government continue to exert pressure by cutting key benefits like child benefit and council tax.

Many people who are deep in debt feel there is no way out and the threat of court of a possible prison sentence due to non-payment of council tax makes the situation worse.

Is your Life Insurance In Trust?

Generally speaking we take life cover for a purpose, it's not just something we wake up in the morning and decide that we need to buy it for no reason. We have a mortgage we would like to pay off, we have dependent children we would like to financially support or we have funeral expenses we would like avoid being left to our family in the untimely event of us shuffling off our mortal coil.

Its not too difficult to understand the reason(s) why we part with our hard earned cash to fund life protection however what can come as a bit of a shock is what actually happens in the event of a claim and this is something that may alarm even the most savvy.

Lets take Mr and Mrs A, who are married and have a joint life policy taken out to pay off their £100,000 joint mortgage. Mr A dies prematurely on Monday. What happens to the life policy? Is it paid directly to Mrs as they are married and/or it’s a joint policy? Not automatically, No. Is it paid directly to the mortgage lender as the policy is to repay the debt on death? Again the answer is no.

The circumstances are a little different depending on the presence of a will. If the clients in question have no will (ie Mr has died intestate) the £100,000 will be paid into the “deceased estate”. The process of releasing the funds to Mrs from the estate is called probate in England or confirmation in Scotland. This can take any were from 12-18 months and can cost 3-7% of the value of the estate in fees.

If, however, the clients do have a will the process of executry can still take up to 6 months for the insurance to be paid as per the instructions on the will. Again there will normally be a fee for this from the solicitors — below 2% is fairly uncommon to give you an indication.

Now consider your own situation for a moment, if you have life insurance could you (or your partner for that matter) afford to pay all the bills INCLUDING the mortgage for the 6 months that it takes for your will to be executed? If the answer is at best a maybe then its something you really should address. A trust is a legal document that allows you to select who you would want your insurance to be paid to (generally done at the commencement of your policy) in the event of your death. This is not set in stone and is normally by way of a discretionary document which can be changed as and when circumstances dictate. There is no probate/confirmation, the pay out attracts no exectury costs, it avoids inheritance (if applicable) and is ring fenced from any creditors/family you wish not to benefit from the pay out.

So why then would someone not have Life insurance written in trust?

The question then is how to put life insurance in trust? The answer would be discuss this with a financial advisor to make sure the correct trust is implemented.

*Trusts are not regulated by the FCA and are not suitable in every single situation.

How Much Tax On £100 Earned Are You Actually Paying?

There’s an old saying; “There’s nothing certain in life but death and taxes.” Nobody likes paying taxes. Every month when we get our pay slips we look at the deductions column and grumble; what more could we do with our lives if we could keep that 22% of tax money?

Well here’s something else to grumble about: for every £100 you earn you actually pay £64.88. You get to live on just £35.12 when the Government has finished taking its whack.

It’s almost unbelievable? If you added up all the money you pay in taxes for the year you would actually work from New Year’s Day until May 24th – a whopping third of the year – just to pay your taxes. You’re taxed if you do spend money. You’re taxed if you don’t spend money. You’re even taxed in your sleep!

Would you like to know just how many ways can the Government tax you?

When you get paid, the Government takes 22% off you in Income Tax or 40% if you’re a higher rate tax payer. So of your original £100, £78 is left. But it’s still not completely yours. You might put aside £3 for Council Tax, £2 for Road Tax and £3 for the VAT on our utilities bills, which is charged at 5%. You have £70 left out of your original £100. But it still isn’t completely yours. You pay 4% tax on the insurance premiums for your property and possessions – about £4 – taking you down to £66.

Finally, it appears that the £66 is all yours to do as you please with. Er…no. Not yet! Let’s say you decide to go out for the evening. You put £16 worth of petrol in the car and drive to a restaurant, where you spend £15 on a meal. On the way you buy a packet of cigarettes for £7. After your meal, you go to the cinema and pay £8 for tickets for the latest blockbuster. Later on you fancy a drink at your local and you spend £9.




How much in tax has your evening cost you?

The AA reports that a staggering 85% of the cost of petrol is pure tax. Your meal and cinema tickets will have been taxed at 20% VAT, adding another £4.60 to the Government’s purse. Around 35% of the cost of alcohol is tax so your £9 round of drinks has automatically added £3.15 to your growing tax bill.

But what about that £7 packet of cigarettes you just purchased? Those 20 cigarettes are actually worth a minuscule 77p, because the tax you pay on them is an astonishing 88.9%. No real surprise the Government doesn’t really want smokers to quit given they’re such a cash cow for them.

So if you are a standard rate tax payer, so far £64.88 of your £100 has been paid to the government in tax. But it doesn’t end there, because there are all sorts of other lovely little taxes that the government has come up with:

  • National insurance contributions
  • Stamp duty
  • Business/ corporation tax
  • Airport tax
  • Capital gains tax
  • Inheritance tax
  • Savings tax

 

But there’s one loud voice in favour of taxes that many of us don’t hear – the European Union (EU). The EU ‘loves’ taxes, so much so that it wants to ‘harmonise’ them, which is a shorthand way of saying that they believe the UK, one of the lowest taxed communities in the EU, should be paying as much as them! And do you know out of all the tax you pay £11 goes to the EU, effectively paying an organization that wants to make you pay more income and purchase tax and be poorer? We’ve already had to stomach a 2.5% VAT increase from 17.5% to 20% – what next?




Short-term all this tax makes us grumble and feel annoyed. But it’s long term that it causes the most damage. Paying so much tax on everything will have a detrimental effect on your life and the lives of your children and grandchildren. Instead of spending 40 years of your life building a secure future for your family you end up working to keep the tax coffers healthy instead.

MP’s expenses, bank bailouts and nationalisation of failing businesses thanks to carelessness, over-spending and sometimes plain old cheating, your hard-earned money goes towards covering it all.

You just couldn’t make it up could you?

Fractional Reserve Banking – How The Banks Make Money Out Of Thin Air

How much money do you think is created by the Government in the UK? Half? Three quarters? It’s the Government that prints money so it must be quite a lot right? Wrong. Shockingly, the Government creates only 3% of the money in the UK, the rest is created by banks. And most of that is created out of thin air by a legal banking practice and it’s called ‘Fractional Reserve Banking’.

What is Fractional Reserve Banking and how does it work?

Put simply, banks do not have to keep all the money that their customers deposit. They only have to keep a fraction of that money in the vaults – usually 10%. The other 90% they loan out.

It all started centuries ago with goldsmiths, who are considered to be western civilisation’s first bankers. Goldsmiths used to provide safekeeping services and make a small charge for doing so. When someone deposited their gold or coins for safekeeping, they were given a deposit receipt. When they needed some of their gold or coins back, they would take the receipt to the goldsmiths and use it to redeem them. Once they had their gold or coins, they would use them to buy what they wanted from a trader, who would in turn then deposit the gold or coins they had been given for their goods back with the goldsmith.

The trouble was, it was a lot of bother to keep going back to the goldsmith to do all of this and soon everyone realised it was a lot easier to hand over the deposit receipts directly to sellers as a means of payment. These deposit receipts became the first bank notes, and all someone had to do was take the note to the bank and receive the gold or coins they were owed.

Then the goldsmiths had a bright idea. These notes, these promises of money, could work for them and make them money. They could give these notes to people as promises of money, or what we now know as loans. They could issue many more loan notes than they had gold or coins in the vault because they knew that only a portion of notes they gave out would be presented for payment at any one time. All they had to do was keep enough gold and coins on hand in the vaults to cover what was presented. But the beauty of it was they could charge the people with the loan notes a small sum of money (what we now know as interest) for the privilege of being ‘loaned’ the money, even though technically the money didn’t exist.

And so the goldsmiths learnt how to make money out of thin air and the fractional banking reserve system was born. As long as the goldsmiths kept a proportion of the money deposited to cover the deposit notes that were presented, they could promise many, many times more the gold and coins they took in as deposits and that they could cover.

Today, the same system is at work, although the majority of the deposit notes have been superceded by the electronic banking system.

So what’s the problem with Fractional Reserve Banking?

The problems start when people lose confidence in their bank and start a rush to withdraw their money. Most of us believe our banks will give us our money back, but if we suspect that all is not well we will naturally try and withdraw it from our lender to stuff in a shoebox under the bed. This phenomenon is called ‘a run’. For obvious reasons, if the bank only reserves, for example, 10% of what is deposited in its vaults, if every saver and investor demanded their money back, the bank be unable to cover those payments and would go bankrupt.

This almost happened to Northern Rock and required the UK Government to step in, give the bank enough money to cover its payments to savers and investors, and restore enough confidence to slow down the run.

While there’s no doubt that Fractional Reserve Banking has given many the ability to buy and improve their own homes, it can also be argued that it has led to too much credit being extended and had a direct hand in the recent global financial meltdown. With the UK’s national debt now hitting £1.5 trillion, it’s a sobering thought that much of it has been manufactured by banks from absolutely nothing.

Energy Companies Owed Money By One In Five Households, Says Leading Trust Deed Provider

Around five million households are currently in debt with their energy providers, says leading Trust Deed provider Trust-deed-scotland.co.uk.

A study of 2000 people by the energy comparison site uSwitch shows consumers in the UK owe around £637 million to their energy providers, which has increased by around 6% since the same time last year. One in five survey respondents said they owed a debt to an energy supplier.

Interestingly, the average amount owed to suppliers has dropped by 6.5% or £8 compared to last year, due in part to price cuts but also the unseasonably warm weather last March and April. However, the average yearly energy bill still stands at £1,400.

Ann Robinson, director of consumer policy at uSwitch, said: “The soaring number of households in debt to energy suppliers is a clear indication of the pressure people are coming under just to meet the cost of their basic bills.”

Despite knowing they needed to clear their bill arrears, 20% of those in debt claimed to be “turning a blind eye’ in the hope the lower summer bills would mean the debt would decrease over time. A further 20% intend to pay off the arrears with a lump sum and 45% by increasing their direct debits.

Among the many energy saving tips uSwitch recommend to keep energy bills under control, paying by direct debit and taking regular meter readings are two which can help households make the most of their energy usage. In addition, making their homes more energy efficient through incentives such as the Green Deal could also be an important part of saving money.

A spokesperson for Trust Deed Provider, Trust-deed-scotland.co.uk said: “It’s been one very long winter and this is reflected in how much people owe to their energy providers. By now people would be turning down their thermostats and putting away their winter clothes, but the prolonged snow has meant heating systems have stayed turned up for at least six weeks past when they normally would. This time last year we had been basking in our gardens in a heat wave – now we’re shivering in our homes in furry slippers and jumpers.”

However, recent reports of mis-selling by energy companies has shown that the most energy conscious households could still be at risk of paying more than they should be. Ofgem recently fined the country’s largest energy company SSE for “prolonged and extensive” mis-selling after it found “failures at every stage of the sales process.”

“Despite taking every precaution to get a better deal, the actions of SSE show that sometimes the energy suppliers will put profits ahead of people,” said Trust Deed Scotland's spokesperson. “Ofgem found that SSE had made misleading statements and supplied misleading and inaccurate information, including making people believe they would save money when they knew they wouldn’t. Instead of having lower bills, some customers that switched were put onto even more expensive contracts by salesman wanting to hit their targets.”

“With that kind of blatant mis-selling, it’s no surprise that people end up in debt.”

Personal Tax Planning And Income Tax

The amount of taxes that you will need to pay can be significantly affected by income tax planning, and you can often enjoy a lower tax bill if you plan carefully. Other types of tax, such as inheritance tax and capital gains tax can also make a difference to the amount that you have to pay.

The following information can potentially make a big difference to what you owe, and you should research these issues when looking at your business  taxes, regardless of the size of your business.

There are two main areas where you can expect to enjoy significant tax savings:

It always pays to take advantage of any tax advantages that your employer might provide to you, such as an incentive scheme for employees. Determining what the value of these benefits is you should be an important part of your income tax planning. There can often be a large tax charge when it comes to company cars, and it's important to plan for income tax in these areas.

Tax relief for contributions to pension plans, either form those made by you or your employer, should also be taken into account when planning for income tax. One of the most valuable benefits that your employer can give you is a final salary occupational pension plan.

Maintaining comprehensive and easy to access records, as well as planning to do next year's tax return are both an important part of basic income tax planning. A self assessment tax return has to be filed by those who are considered to be high earning, company directors and anyone self employed, as well as by anyone whose tax situation is complex.

Income Tax Savings Planning

Eliminating or at least reducing income tax or capital gains tax by transferring your savings to your spouse is just one of the things to focus on to save when planning income tax. Another effective way to save is by using an ISA.

A pension contribution on behalf of child, or an investment in a venture capital trust that qualifies for the Enterprise Investment Scheme are other ways for high income individuals to save.

Property Taxes

Capital gains tax is not assessed on your home, although if you buy a home you will probably pay both stamp duty and council tax. However, if own a second home as an investment, or you make money from the rental of the home, you may have to pay capital gains tax. You should also take into account your likelihood of having to pay capital gains tax. Taxes can be complex when it comes to property, meaning that thorough income tax planning is essential.

Credit Licenses Refused As The OFT Drives Up Industry Standards

The Office of Fair Trading (OFT) has ramped up its efforts to drive up standards in the financial sector by refusing to grant credit licenses to three debt management companies, says IVA broker IVAOnline.co.uk.

Credit licenses are awarded to companies that operate a consumer-based credit business and have shown they are fit to do so. The three companies that were refused licenses – Lancashire-based Welcome Solutions Limited, Manchester-based Debt Connect (UK) Limited, and Cornwall-based trader Rowena Koning – are among the first to be rejected for licenses by the OFT as part of its ongoing drive to improve the debt management sector’s standards.

Welcome and Debt Connect were considered to have engaged in unfair or improper business practices, which included falsely claiming or implying that debt advice was free and impartial, publishing misleading or false testimonials, providing inaccurate and misleading information and not having proper practices and procedures in place. At the same time as refusing to renew the license of Debt Connect, it also revoked the associated license of claims Management Company Connected Claims Limited.

Part of providing a debt management consumer credit service is having the necessary skills, knowledge and experience to do so, and in this respect all three companies fell short of what the OFT requires. In particular, Rowena Koning was considered to have too little training and experience, which would make her heavily reliant on third party support when it comes to compliance matters.

Since 2010 the OFT has either refused to renew or grant 100 licenses in the debt management sector, and David Fisher, OFT Director of Consumer Credit, said: “The OFT will not hesitate to refuse licenses to those who cannot establish that they are fit to operate a debt management business and we will revoke existing licenses when necessary. Our goal is to ensure that people in financial difficulty who pay for debt advice can be confident that they are dealing with businesses that are competent to give them good advice.”

A spokesperson for IVA broker IVAOnline said: “Driving up the standards in the debt management sector has been a priority for the OFT since 2010. Debt management companies that persistently flout the Consumer Credit Act (1974) will be targeted to prevent them from imposing unfair or improper business practices on consumers and this can only be a good thing. People in debt are often desperate and very vulnerable, and companies that prey on them thinking they are easy to manipulate have no business being in business. They are certainly not helping consumers. They’re only helping themselves.”

Both Welcome and Debt Connect (UK) can now appeal against the OFT’s decision within 28 days if they wish, although until the appeal is concluded they will still be allowed to continue trading. If they do not wish to appeal their licenses will be revoked. An appeal has already been made by Mrs Koning and has been dismissed by the First-Tier Tribunal (Consumer Credit).

All You Need To Know About Scottish Trust Deeds In Scotland

A Scottish Trust Deed is defined as a legal debt solution usually expressed in the form of a contract. The contract is between a debtor and a creditor and this form of contract is usually supervised and managed by an Insolvency Practitioner who is licensed. Scottish Trust Deeds will help you reach a compromise with your creditor and get you on the path to debt freedom.

Who can take out a Scottish Trust Deed?

Scottish Trust Deeds are only available for insolvent people living in Scotland who are experiencing problems with their creditors. It falls under the Bankruptcy Scotland Act which was formed in 1985 and later amended in 2008. Many people find this helpful especially property owners who want to avoid the risk of losing their property when they become bankrupt. A debtor can be an individual or a partnership and they are protected from legal debt enforcements included in the trust deed.

What will change?

It is important to know that Scottish Trust Deeds will not change any decision that was taken before the deed; for example bank statements. The trustee can however negotiate for things like the lifting of arrestment. You may not loose your property when you enter into a trust deed. There are certain things that must exist for you to be able to sign a deed. You must be in control of your spending and this means you do not qualify to get credit; for example you have to buy things for cash and be able to live within your means.

What are the advantages?

There are many advantages of entering into this type of contract. There is no interest and zero charges on your payments. The monthly instalments that you are going to pay are basically what you can afford. There will not be any direct fees that you pay but some service providers may need you to pay some charges upfront. You will not be bothered by creditors throughout the term of the contract. It also means you are protected from any legal action and you will be in a position to manage and control your financial problems.

Is my home at risk from repossession in a Trust Deed?

Although there are a lot of advantages it is important to know that in order for the trust deed to be accepted your property may remain at risk if the creditor does not include them. Your financial and credit history will be affected negatively; getting credit becomes more expensive in the future. You will also not be able to use your credit cards. It also means you will not be able to borrow money during that period until you have completed the arrangement. If you fail to meet your obligations and the trust deed fails then you may be sequestrated.

What is the criteria for a PTD?

In order to apply for a Scottish Trust Deed you need to approach any solvency practitioner in Scotland. The only professionals who can regulate theses deeds are Insolvency Practitioners and they must be licensed. You can contact their professional body if you have any problems with them. There are certain obligations however of entering into this arrangement. When you agree to sign it means you have entered into a legally binding contract and you must cooperate with the trustee throughout the contract.

All payments must be done on time and you are not supposed to enter into other credit agreements. Any changes in terms of your financial circumstances must also be communicated to the trustee; things like unemployment for example may require the trustee to review and assess what is reasonable in terms of your monthly contribution.

Who is the best Scottish Trust Deed Company?

It is a good idea to shop around for a reputable insolvency practitioner because they are the only specialists who can arrange trust deeds. You can search on the internet and do background checks just to confirm how reputable they are. You may also find out from family and friends, they may refer you to practitioners they have dealt with in the past. In most cases insolvency practitioners do not charge fees for setting up deeds, they usually negotiate with creditors to have the fees taken from the money paid into the trust deed.

How long does it take to setup a Trust Deed in Scotland?

Setting up this arrangement normally takes between two and three months. It is important to note that your credit rating can be greatly affected for a period of about three years. It means you can not get credit and may fail to get it even in the fourth year as you will be still building your credit rating. At the end of the day it is important to note that a trust deed costs less to setup than a bankruptcy, you will also be free from interest charges and you can even remain a company director or hold a public office. In addition to that all the debt that remains after three years will be cancelled.