Is a Trust Deed a good alternative to Bankruptcy?

If you currently have large debts that you are struggling to repay, then your thoughts may start to turn towards Sequestration (bankruptcy).

A Scottish Trust Deed on the other hand can be a better option as it enables you to clear your current debts whilst also avoiding some of the downsides of sequestration.

A Trust Deed is a legally binding agreement between yourself (the debtor), and the people you owe money to (the creditors).

In a Scottish Trust Deed agreement the debtor agrees to repay a percentage of their current debt to the creditors, calculated on how much they can realistically afford to repay each month once essential living costs have been deducted.

In order to enter into a Trust Deed you will first need to discuss the situation with a debt adviser. If the advisor feels that a Trust Deed is the right debt solution for your needs, they will then refer you a licensed Insolvency Practitioner (IP). From there you will work with the Insolvency Practitioner to draw up a proposal which will be sent to your creditors.

If you Trust Deed proposal is not rejected by more than half of your creditors, or by creditors accounting for more than a third of your debts between them, your Trust Deed will be approved – protected by law.

Once your Trust Deed has been approved, you will begin to make regular monthly payments to your Insolvency Practitioner, who will in in turn distribute the agreed amounts to each of your lenders. This process will likely continue for 36 months (three years), after which time any remaining debt will be written off.