How Does A Trust Deed Work?

Let’s run through the process that is involved when setting up a Trust Deed. A Trust Deed acts as a voluntary agreement between the debtor and their creditors which is overseen by a qualified insolvency practitioner (also known as the trustee).

The important role of the trustee is to take control of the debtor’s legal possessions and to execute on the whole of the Trust Deed process. The trustee also has the ability to sell the debtor’s possessions to pay the creditors should the need arise.

Once this has been established, and depending on the financial status of the debtor in question, the trustee will then begin to draft the actual trust deed.

When drafting the trust deed the trustee will enquire and confirm the total amount of the debtor’s earnings. Based on this information the trustee can then subtract the debtor’s total monthly expenses, outgoings and the basic cost of living. From this point the trustee will be able to accurately calculate an amount that the debtor will realistically be able to repay each month for their debt.

The repayment amount is calculated on how much you can pay for every £1. For example, if the trustee finds that the debtor can afford to repay 30 pence for £1 he will draft the proposal accordingly and present it to the creditors.

Once the repayment amounts have been calculated, the trustee will publish the trust deed proposal in the Edinburgh Gazette to inform all the creditors. Once published, the creditors are allowed five weeks in which to either agree or disagree with the trustee’s proposal.

If none of the creditors object to the proposal during te five week window, then the deed is treated as approved and protected. As long as a creditor or creditors who have lent more than 33% of the total amount do not object, the proposal is considered as a legal binding to all the creditors. In most cases the creditors will accept the deed if the offer includes a minimum of 10p for every £1.

After the trust deed has been accepted by the creditors, the trustee will then begin further proceedings, dealing with the creditors on your behalf from then on.

The rules of a Trust Deed are fixed and the trustee strictly executes them so that the debt is paid off properly. The trust deed normally runs for 3 years and after that all the debts are written off.

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