Trust Deeds in Scotland are a legal agreement, supported by the Bankruptcy (Scotland Act) 1985, between debtors in Scotland and their creditors to pay off their debts over a pre-agreed period of time. There are two types of Trust Deed:
A ‘voluntary’ Trust Deed is where an agreement is made between a debtor and their creditors to repay part of what they owe. However, unless creditors agree to all its terms, this type of deed is not binding.
A ‘protected’ Trust Deed Is however binding on all creditors. Non-agreeing creditors are denied from enforcing their debt by sequestration or any other means.
Simple Financial Solutions can impart clear, helpful advice on Scottish Trust Deeds and whether they offer the resolve your debt issues. For instance, it is important to note that, unlike other debt solutions like an IVA, only a minimum of £5,000 of unsecured debt is required to apply. Also, a Trust Deed’s terms are not laid down in law and can contain any terms you think your creditors will accept. However, if you want a Protected Trust Deed, you must transfer all you own except household items.
Once the Trust Deed is signed you must adhere to its terms. Throughout the period of the Trust Deed you must cooperate and provide up-to-date income and expenditure through bank statements.
Scottish Trust Deeds – The Benefits
Scottish Trust Deeds are similar to IVAs and have the following benefits:
- Instead of managing multiple payments to different creditors, you only have to make one affordable payment each month
- ALL your creditors are bound by the terms of the agreement
- All interest and credit charges on your existing debts will be frozen
- Your outgoings will be fixed for a reasonable length of time – normally four years
Scottish Trust Deeds – The Risks
There are a few factors to be wary of when considering taking out a Scottish Trust Deed. These include:
- Your credit rating will be affected
- You will not be able to be a Director in a Limited Company
- You may be made bankrupt if you fail to meet the payments of a Trust Deed
- All your assets and liabilities have to be declared upfront and they may be sold to release their value (including any equity in a property)
What Costs Are Involved?
This depends on how much you owe (and to how many creditors). You must employ the services of a qualified and registered Insolvency Practitioner who will charge a fee to take on your case along with ongoing management charges (taken from your monthly payment before it is disbursed). Typically, an average Trust Deed will cost £4000.