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Trust Deed Questions

1 What is a Trust Deed? 2 How will it affect my credit rating? 3 Am I eligible for a Trust Deed? 4 What is a Protected Trust Deed? 5 What are the advantages and disadvantages? 6 How long can it take to arrange a Trust Deed?

Answers

1 What is a Trust Deed?

A Trust Deed is only available to residents of Scotland, and offers a debtor an alternative route to bankruptcy or debt management. A Trust Deed usually lasts for four years, and any debts that are remaining at the end of the arrangement are written off. Our advisors will work out a payment plan with the debtor, and assuming that this amount is above a set minimum (dependent upon debt level and homeowner details) the creditors will accept the proposal. The agreement itself is based upon government legislation and is administered by a licenced Insolvency Practitioner (IP) who is also called the Trustee.

2 How will it affect my credit rating?

Entering into a Trust Deed will be recorded on your credit file. However, a Trust Deed will ensure that regular payments are made to your creditors, something which may not have been possible outside of the structure of the arrangement. Once the Trust Deed has finished, it will remain on your credit file for three more years, but after these three years your credit file will show no record of the Trust Deed, or the financial struggle you may be facing now.

3 Am I eligible for a Trust Deed?

The debtor must have lived in Scotland for the previous six months at least. If the debtor is a homeowner, the equity in the property must not exceed the total level of debt. There is no minimum set debt level that an applicant must have, however, the client should be looking to avoid Bankruptcy (Sequestration), so we advise that the minimum level to enter a Trust Deed should be at least £10000 to two separate creditors. The debtor must also be in employment, and usually under the age of 62.

4 What is a Protected Trust Deed?

If the Trust Deed becomes protected, the creditors cannot petition for Sequestration or any further court action. Adverts can be placed in government publications, and if more than one third of the creditors object, this can prevent the Trust Deed from becoming protected. A Protected Trust Deed will also stop any further action by a creditor towards a debtor’s property or assets.

5 What are the advantages and disadvantages?

Advantages:

  • All calls and correspondence is dealt with by the Trustee
  • More flexible and potentially less costly than Sequestration
  • All interest and charges are stopped
  • Employment status will be unaffected, in the vast majority of cases
  • Entering into a Trust Deed does not become public knowledge, unlike Sequestration

Disadvantages:

  • Company directorship of a limited company may be affected
  • A Trust Deed is a legally binding arrangement, which if not adhered to will most likely result in Sequestration
  • It will be recorded on your credit file for three years after the Trust Deed is complete
  • The creditors must vote on accepting the arrangement. If 30% decline, this could prevent the arrangement from being accepted.
6 How long can it take to arrange a Trust Deed

Once we have received all of your required documentation, our IPs can draft a copy of the proposal for you to sign within one week. This is then sent to the creditors, where they will accept of decline the offerings, usually by proxy. This process can take up to 6-8 weeks to conclude. During this period, you will not be expected to continue to make payments to your creditors until any outstanding issues have been resolved.