What is a Trust Deed?
It is a mechanism by which you can repay your debts over a specified
period. Monthly payments are based on what you can afford and after
the period of your arrangement, any remaining debts are written
off. It is only appropriate where you are unable to make full monthly
payments to your lenders and is a formal legally binding agreement
between you and a licensed Insolvency Practitioner (the Trustee).
What is the process?
If you decide to go ahead with a Trust Deed
you must provide the Trustee with details
of everyone you owe money to, how much you
think you can pay into an arrangement each
month and any other financial information
that might me relevant.
The Trustee will put together a form of proposals
to the lenders for approval and administer
the Trust Deed. A Trust Deed is a form of
“informal” bankruptcy but still
regulated by The Bankruptcy (Scotland) Act
1985.
Provided certain conditions are met, the Trust
Deed may be registered as "protected".
This prevents lenders from taking legal action
against you and ensures that interest will
be frozen on your debts.
What are the advantages of a Trust
Deed?
- The pressure of being in debt is reduced as
all correspondence, including any queries from lenders, is handled
by the Trustee.
- A Trust Deed is usually more flexible and
costs less to administer than sequestration.
- It also allows the debtor the right to hold
certain public offices - which would not be the case with sequestration.
- It may be possible for companies to continue
trading and individuals to retain their directorships.
- The information is not published (unlike sequestration).
What about my house?
If you enter into a Trust Deed then lenders
do have the right to receive any equity that
you may have in your home to repay your debts.
However, there are mechanisms that can be
put in place to protect your home such as
“buy-back” or extra contributions.
If this was not possible then we would suggest
you seek alternatives such as a Debt
Management Plan.
What does it mean when a Trust
Deed becomes “protected”?
This means that no further action can be taken against you by your
creditors for recovery of the money you owe them. Lenders have to
accept the balance of your Trust Fund account as full and final
settlement at the end of the three year period.
What are the costs?
There are no set-up charges for the work involved in drawing up
the documentation. The Trustee agrees their fees with the lenders
and these are met from the Trust Fund account throughout the duration
of the arrangement. So you have nothing to pay upfront and your
lenders agree to a reduction in their income to pay for the administration
of the Trust Deed.
What am I committing myself to
if I sign a Trust Deed?
You are entering into a contract to repay your debts, usually at
a reduced rate. As such you agree to:
- Co-operate with the Trustee
- Pay the agreed monthly contribution
- Not take any further credit
- Advise the Trustee should you receive any
unexpected windfalls in excess of £200.
What happens to the interest and charges
on my debts? All interest and charges on your
debts will be frozen at the date of signing
the Trust Deed. Is a Trust Deed suitable for
me? There are a number of factors to take
into consideration before answering this question.
To find out whether this is a suitable option for you call Payplan on 0800
917 7823 or email help@payplan.com
If you are interested in finding out more about Trust Deeds visit
www.debthelpscotland.co.uk.
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