Trust Deeds: More Information
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A Trust Deed is a formal arrangement available to residents of Scotland with debt problems, to protect them from legal action by their creditors and to ensure that they are able to keep their property. The agreement is between the individual who is unable to pay their debts and an Insolvency Practitioner (known as the 'Trustee').
If you enter into a Trust Deed, you would have your monthly income and your expenditure assessed by the Trustee, and if you have any disposable income (after your rent/mortgage and any essentials are covered), this would be used towards paying off your debt. If you have any valuable assets such as a car, an investment portfolio, or equity in your property, this would also have to be used towards repayment of your debts. Once they have thoroughly examined your finances, the Trustee would put together a proposal for your creditors, detailing how you are going to pay them back.
The aim of a Trust Deed is to provide your creditors with a better solution than if you were to be sequestrated (a legal state known elsewhere in the UK as bankruptcy), and it is the Trustee's job to help you to use your available funds and assets to pay off as much of your debt as you reasonably can. Usually, creditors will accept a repayment proposal that is less than the full amount as long as you can show you are taking steps to solve the problem.
Your creditors have 5 weeks to object to the proposal that the Trustee puts together. If most of the creditors accept the proposal (or if they do not at least raise any objections), the Trust Deed becomes 'Protected'. A 'protected' trust deed is where, provided that the person in debt keeps to the terms of the proposal, their creditors are prevented from petitioning for them to be sequestrated.
Eligibility Criteria for a Trust Deed
As with the Individual Voluntary Agreement (IVA), there are certain levels of debt that you would need to face in order to be eligible for a trust deed. You should have a minimum of £10,000 of debt and in full-time employment (so that your creditors can see that you have an income that can be used towards paying off the debt).
Although there is no set age restriction, you should usually be 62 years old or younger. The reason for this is that a Trust Deed will typically last for 3 years, and the creditors will need to ensure that you will have an income throughout the duration of the Trust Deed. If you do not meet all of these criteria, do not worry. Each case will be considered by the Insolvency Practitioner on an individual basis, as long as you are a resident of Scotland.
To find an experienced Insolvency Practitioner to help you find a solution to your debt problem, please visit our debt management form (Change link). We will put you in touch with a qualified debt adviser.