Your Guide to Trust Deeds
It can often be hard to face debt alone. Any good debt advice expert will be happy to inform you that there are many different options available to you should you wish to seek support on clearing money you owe with several different creditors – and while many of the options available may concern changing a few of your own habits and making a few arrangements of your own, one of the more popular options for debt consolidation and support in Scotland is the Trust Deed. A Trust Deed application will work much in the same vein as an Individual Voluntary Arrangement, or IVA – in that a third party will work on your behalf to help clear any debts you may have with a range of different creditors. For those seeking expert debt advice in Scotland, this is an option that may appeal if you are juggling many different debt-shaped balls at once.
What is a Trust Deed?
In simple terms, a trust deed arrangement allows you to effectively take time out from making payments that you cannot afford. A trust deed advisor or insolvency practitioner will work on your behalf to consolidate debt and to negotiate with any creditors on your behalf. This works as it does with the IVA elsewhere in the UK – though there are a number of different weights and measures that apply to either option.
A trust deed advisor will be able to help arrange for you to make reduced payments to them directly over what is generally seen to be a four-year plan. This means it is an effective short and long term solution for those seeking debt expertise – though you must make sure that the debt you owe which is ‘unsecured’ (for example loans and card debt) totals more than the value of your assets. Applicable assets can include cars, homes or other high-value investments.
Why Should I Apply for a Trust Deed?
Your trust deed application, should it be successful, will help you to not only clear debt with the creditors who demand it, but it will also allow you to maintain control over your possessions and to avoid further prosecution. Arranging a trust deed with a debt solutions advisor will enable you to effectively prevent any further legal action from being taken against you – providing that you are in a position to pay a monthly rate as agreed with an advisor through a trust deed. It is worth mentioning that such benefits will only arise once a trust deed has become protected – and that any action already underway before application will not be reversed.
What is a Protected Trust Deed?
A protected trust deed effectively prevents creditors from taking certain actions against you – while interest and additional charges are also frozen. A protected trust deed is arranged when a debtor agrees to effectively transfer their estate to a trustee so that creditors may be satisfied. This means that the person in debt can now pay off an agreed amount to the third party liquidator each month for up to four months. After this date, the debt can be cleared. Assets can be put through liquidation so that such fees can be cleared – however, you will be expected to pay with normal cash on a basis that has been agreed between all parties. It is also worth mentioning that in many cases, equity may have to be released from any property assets to help protect a trust deed. This is why agreements between debtors and trustees must be clear from the offset.
What Will be Expected of Me?
You will need to have been resident in Scotland for at least six months – and you must also be aware that a trust deed arrangement is a legal, binding contract whereby you agree to transfer your estate and release any equity, as required, to help clear debts with creditors.
You will need to be fully co-operative with your trustee and you must make monthly payments in full and on time each month – and, largely, you will be advised not to take out any further credit. Should you come into more money than you are expecting, a trustee will analyse your financial situation to ascertain whether or not any changes should be made – but if, for example, you find it difficult to make monthly payments, you may need to release equity to keep an arrangement up.
You should also be aware that a trust deed arrangement will have an effect upon your credit rating. This means that you can expect to see the arrangement listed on your credit file for up to two years after completion – meaning that, while you may find it difficult to secure further credit temporarily, you will be free from debt following the four-year period. It is therefore a very attractive form of debt relief to many people and organisations – though it is not the only option available. You can get more debt help and advice from our team by contacting us today.
Restrictions in Place
As with any binding agreement, you must also be aware that there are expectations of you that you should adhere to and obey at all times. It is recommended that, if at all, you seek a protected arrangement to legally prevent creditors from taking any further action against you – and you must also agree that an insolvency practitioner or debt support expert has access to your financial data to be able to build a trust deed proposal upon your behalf. This is to see if your circumstances will directly benefit from such an arrangement, too.
In order to protect a trust deed, it must be to the value of at least £5000 – and this will be analysed and explained to you upon any application you make
There are, too, reasons why you may not wish to apply for a trust deed. These arrangements do not necessarily force all action to cease – and it will mean that you effectively stake your property on an arrangement in the event that you may need to release equity. This, of course, makes your ownership over the value of your home become a little more complicated.
Your employer may not be able to permit you from entering such an arrangement, as it is regarded as a form of insolvency. It is, as mentioned, also a heavy blow to your credit rating – and while it means that you will be debt-free by the end of the four-year arrangements, you may struggle to apply for any more credit for another two years. It is therefore worth bearing these factors in mind while in discussion with a debt advice expert.
Trust deeds, too, are a public record – and you should also be confident that you will be able to pay the monthly agreed amount to the practitioner as agreed. Otherwise, you may find yourself facing penalty fines – and if you accrue debt during such an agreement through means of adopting further credit, you may even face prosecution. All of these factors will be discussed with you in clear detail before you sign any paperwork or make any solid agreements.
Other Debt Solutions
As debt solution experts, we are of course happy to discuss any other options which may be more convenient or comfortable for your circumstances. Applying for a trust deed doesn’t have to be scary – but it is always important that you understand the ramifications of any agreements that you may be entering into. However, we will endeavour to discuss all other applicable debt management solutions with you ahead of any major choice being made.
It may be worth considering Debt Management Plans if you wish to arrange to pay a minimum to creditors on a monthly basis. Unlike trust deeds, these arrangements allow you to communicate directly with creditors and largely don’t feature much of the legal red tape that come with these types of consolidations.
There is also the option of a Debt Arrangement Scheme which is available for residents in Scotland. It is an option which can help manage your current debts if you are able to make monthly repayments over a specified period of time. This can help reduce the money owed to creditors and prevent the need for any action from them.
If you are looking to wipe the slate clean with your existing debts, we can offer Bankruptcy Advice as this may be an option for you. This is of course a big decision to make when it comes to personal finances and business debts. Many people choose this option if the have large debts and not many assets. You should be aware of everything involved with this process so feel free to contact us for more help.
For others, a Sequestration in Scotland may be worthwhile. This is the process of allowing your debts to become written off – it is the Scottish form of bankruptcy – and it is only ever advisable under certain circumstances. It is also a process through which many people are fearful to tread into – though it really needn’t be!
Another option to consider would be Consolidating Your Debts into one simple amount which needs to be repaid. This is a very common method of dealing with debts and makes it much easier to manage your repayments as you are not dealing with multiple creditors all at once.
A very popular method of handling debt problems is to get an Individual Voluntary Arrangement (IVA) and lots of people choose this option. It also involves consolidating the existing debts from different creditors. You will work with an expert to set up an agreed monthly amount for you to repay.
Full and Final Settlements are ideal for those in debt who wish to make arrangements with their creditors but whom may not be able to pay the full amount requested.
With the help of a financial advisor or debt solutions expert, you will be able to propose a final settlement with your creditors which they may be obliged to accept or reject. This, at the very least, shows willing to clear a majority of debt – but the decision will lie with anyone you owe money to.
Contact a friendly debt solutions advisor today for more advice on how to manage repayments and lighten the financial load for the better. If you would like to know more about trust deed applications or other options that may be available and applicable to you, call us today on 0808 223 4188 without hesitation.