Trust Deeds
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 us Freephone: 0800 0150607 or email
us
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