A Trust Deed, is a form of insolvency for unsecured debts such as credit card debts, personal loan debts, and store card debt. Trust Deeds are only available only for residents of Scotland, and those who seek a Trust Deed must have lived in Scotland for a minimum of six months before entering into any such agreement. Trust Deeds are similar to what an Individual Voluntary Agreement (IVA) is in England, Wales or Northern Ireland, although the benefits, disadvantages, risks and fees can vary dramatically. If you are a resident of Scotland who is interested in entering into a trust deed, it’s wise to first seek debt advice from a qualified credit counselor or an insolvency practitioner (IP). Many IPs provide a free initial consultation regarding your protected trust deed options.
How Does a Protected Trust Deed Work?
When you apply for a Trust Deed, you and your counsel or IP create an assessment of your affordability to work out what you can reasonably afford to pay each month. This will be your income minus your day to day living expenses including rent, bills, and daily travel expenses. Your assets are then temporarily passed onto someone who will be looking after your financial Affairs.
Advantages of a Protected Trust Deed
Once your Trust Deed is established, you enter into a schedule of monthly payments that can last upwards to four years. Once you and your creditors have agreed to a Trust Deed, all interest and fees from debts included within it will be frozen. In addition, Creditors involved in the agreement legally bound to send regular statements but are unable to contact you chasing payment. All Trust Deeds are contingent on you paying the agreed upon monthly contribution on time. In addition, trustees may be forbidden to enter into any additional credit agreements whilst their Trust Deed is in place.
Once you have successfully completed your Trust Deed balances on any included debt will be written off. In addition, while a Protected Trust Deed is a formal, legally-binding debt management solution in Scotland, entering into one does not require any court appearances. Obtaining credit during the term of the Trust Deed is restricted and will usually require the ‘Trustees’ Approval before applying.
Disadvantages of a Protected Trust Deed
A Trust Deed will affect your credit score for up to six years from the date you enter into your agreement, which can hinder the prospects of you getting a mortgage or a loan in the future. Trust Deeds often prevent many avenues of employment unless the terms of your agreement dictate otherwise. Roles you will not be legally viable to be employed in range from director of a company, as well as many jobs in the financial services and the legal profession.