Trust Deeds
If you live in Scotland and have unsecured debts that you're struggling to pay, a Trust Deed could be the ideal solution. Payplan offers free impartial advice on dealing with debts, and could arrange a Trust Deed for you.
What is a Trust Deed?
A Trust Deed is a voluntary agreement between an individual who is unable to pay his or her debts and a licensed Insolvency Practitioner (the Trustee). It allows you to pay as much of your debts as your assets and your monthly surplus income will allow. Trust Deeds normally last between three and five years.
The role of the Trustee is to present your Trust Deed proposals to your creditors and then administer the Trust Deed to its completion.
As long as no more than half (in number) or a third (in value) of your creditors object to your Trust Deed, then it will become protected. Once the Trust Deed is protected, your creditors cannot take further action against you or make you bankrupt. Once you've successfully completed your Trust Deed, you’ll be free from all debt included in it.
While the terms of a Debt Management Plan are informal, and creditors may increase their demands on you at any time, with a protected Trust Deed, interest and charges will be frozen for its duration.
Another alternative debt solution in Scotland is the Debt Arrangement Scheme (DAS). This is a government-run debt management tool that allows you to repay your debts through a Debt Payment Programme (DPP). With a DPP, you can pay off your debts over an extended period of time, with protection from your creditors. A DPP can last for any reasonable length of time and, if approved, all interest, fees and charges on the debt will be frozen, and you'll be protected from any legal action by your creditors. It's also possible to change the amount you pay to the DPP, or allow up to a six month suspension of payments if you suffer a temporary period of reduced income. However, the DPP will last until your debts are cleared and could be revoked if you have missed two payments and a third is due. If it is revoked, you’ll be liable for all interest, penalties and other charges that would have been payable had the DPP not been approved.
The process of a Trust Deed is not as formal as Sequestration (bankruptcy). Although it is a legally-binding agreement, there's no court involvement in setting up the process. Once signed, you are committed to the terms of your agreement.
Could a Trust Deed be right for me?
The criteria for entering into a Trust Deed are straightforward, and we'll be happy to talk them through with you.
- Only individuals residing in Scotland can enter into a Trust Deed
- There's no set amount of debt or level of contribution required for a Trust Deed
- Each Trust Deed proposal is treated individually, based on your own unique circumstances
- Only unsecured debts can be included in a Trust Deed (these are debts that aren't secured against property or other assets)
If you have any questions about whether a Trust Deed may be suitable for you, please don't hesitate to call us.
What makes a Trust Deed preferable to other debt solutions?
For those with a large amount of unsecured debt, for whom a Debt Management Plan (DMP) or a Debt Payment Programme (DPP) may not offer a solution within a fixed timescale and for whom Sequestration (bankruptcy) may be too disruptive, a Protected Trust Deed offers financial freedom within the foreseeable future.
- All interest and charges will be frozen
- Pressure from creditors will be eased, as the Trustee deals with all correspondence and queries
- A Trust Deed is usually more flexible than Sequestration. It also allows the individual to hold certain public offices, which may not be the case with sequestration
- It may be possible for companies to continue trading and individuals to retain their directorships
- Trust Deeds are not published in local newspapers
- After you successfully complete the term of your Protected Trust Deed, you are free from all debt included in it
What other points about Trust Deeds should I be aware of?
A Trust Deed will not be the ideal solution for everyone and you should consider all the implications before you enter into an agreement, including those listed below. Once again, please call us at any time for free, impartial and confidential advice.
- All assets and liabilities have to be declared. You may be required to release equity in your property and any assets of large value will need to be sold to raise funds
- Entering a Trust Deed will affect your credit rating
- You need to stick carefully to a budget for the duration of your Trust Deed and your income and expenditure will be reviewed regularly during the Trust Deed
Call Payplan free on 0800 280 2816or use our online Debt Help Form for free advice about Trust Deeds.
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