The main advantage of a Trust Deed is that it allows you to pay off a section of your debt in affordable monthly payments that are calculated based on your living expenses. This is to make sure you always have enough money to live off after you’ve paid towards your debts each month.
A Trust Deed is a formal, legally binding arrangement overseen by the Accountant in Bankruptcy. A licensed insolvency practitioner is needed to act as a Trustee. An insolvency practitioner is a licensed debt expert that acts as a middleman between you and your creditors.
A Trust Deed usually lasts for a period of 4 years. Once the Trust Deed’s duration is up, all unpaid debts will be written off.
How would this affect me?
Trust Deeds can take around 6 weeks to set up from start to finish. Once setup is complete and the Trust Deed is agreed on, it becomes ‘protected’. Once this happens, all charges and interest on your debt is frozen. This means your debt will not increase for the duration of the Trust Deed.
Having a Trust Deed also means any arrestments on your wages due to council tax arrears will be lifted. Also, your creditors can no longer contact you in any way to collect your debt, or start any legal proceedings against you.
However, you will be put on a public register that records the details of those people participating in a Trust Deed.
What are the advantages of a Trust Deed?
- All interest and charges are frozen once the Trust Deed becomes ‘protected’, so your debt will not increase.
- Your chosen Insolvency Practitioner acts as your Trustee and deals with your creditors for you.
- You are not obliged to tell anyone you are involved in a Trust Deed (unless it affects the terms of your employment).
- A Trust Deed can protect your house and assets from the threat of sale.
- One affordable payment per month for all of your debts.
What are the disadvantages of a Trust Deed?
- Your credit rating may be affected.
- You risk sequestration, but only if the Trust Deed fails or you fail to keep up with payments.
- It may affect the terms of your employment, in specific circumstances.
- You won’t be allowed further credit for the duration of the Trust Deed.
- If you are a homeowner and have equity you can be asked to make an additional 12 monthly payments to protect your property.
Who is Eligible for a Trust Deed?
To be eligible for a Trust Deed, you must:
- Have lived in Scotland for over 6 months.
- Have debts exceeding £5,000
- Have a willing insolvency practitioner to act as a third-party.