TrustDeed.org was launched to help provide debt information and guidance for people living in Scotland.
We know that being heavily in debt can significantly affect your quality of life. But TrustDeed.org aims to help to relieve some of the burden by giving you the right tools and information you need to begin reducing your monthly repayments.
What is a Trust Deed?
A Trust Deed (also known as a Protected Trust, Scottish Trust Deed, PTDs) is a legally binding agreement between an individual who is unable to pay his or her creditors and a licensed Insolvency Practitioner (known as the Trustee).
It is an alternative solution to sequestration (bankruptcy) and is the Scottish equivalent to an IVA (Individual Voluntary Agreement).
A Scottish Trust Deed is designed to help individuals who cannot repay their debts a way to reach an agreement with their creditors (with the aid of a Trustee), in which they will begin a monthly repayment schedule based on what they can realistically afford.
The Trust Deed will be in place for a specific period of time, and is usually over three years. Once the agreed period of time is over, any remaining debts that the debtor owes are written off.
A Trust Deed can also be registered as Protected in some circumstances. Dependent on whether certain criteria is met, a Protected Trust Deed will bind creditors to the agreement meaning that any charges and interest on your debt will be frozen and your creditors will not contact you for the duration of the Protected Trust Deed period.
The process of a Trust Deed is not as formal as sequestration (bankruptcy). Although it is a legally binding agreement, there is no court involvement in setting up the process.
What is a Protected Trust Deed?
If 2/3 or more of your creditors agree to the terms and conditions of your Trust Deed proposal it is possible to make the deed protected.
A Protected Trust Deed will prevent any creditor from taking any further action against (for example seeking sequestration), and prevents them from applying any additional charges or interest onto the amount owed.
New regulations came into force in 2008 that require trustees also provide additional information that includes:
- A Statement of the Debtor’s Affairs and to complete Form 3. It includes the anticipated contributions from the debtor, expected realisations from assets, the estimated cost of administering the protected trust deed and proposed dividend to ordinary creditors.
- A Statement of Anticipated Realisations from a Protected Trust Deed
What are the advantages and disadvantages of a Trust Deed?
If you’re currently struggling to repay a large amount of unsecured debt, then a Trust Deed may be a good debt solution. But like any debt solution it is important that consider the advantages and disadvantages a Trust Deed has before making a definite decision.
Advantages of a Trust Deed
- Pressure from creditors will be eased, as the Trustee deals with all correspondence and queries.
- It may be possible for companies to continue trading and individuals to retain their directorships.
- A Trust Deed will enable the debtor to pay a single fixed amount each month during the course of the deed.
- After paying the Trust Deed for 36 months any remaining debt is written off.
- All interest and charges on the debt owed are frozen
- Trust Deeds offers more flexibility than bankruptcy
- Unlike bankruptcy, Trust Deed information are not published in the local newspapers
Disadvantages of a Trust Deed
- All assets and liabilities have to be declared. You will be required to release any equity in your property and assets of large value will be realised.
- Entering a Trust Deed will affect your credit rating.
- The debtor cannot hold posts of a director in a limited company
- Failing to make payment according to the trust deed can lead the debtor to bankruptcy.
- The details are published in the Edinburgh Gazette.
- If the creditors agree to the trust deed, it is recorded in Register of Insolvencies (public record).
- The trustee will charge for his or her service
