A Trust Deed is something that any Scottish in debt of over £5,000 will be interested in. This is an agreement which is administered by an Insolvency practitioner, who is the trustee. It allows people with unsecured loans with various creditors to repay their loans in 4 years or more without much hassle.
Who should apply for a Trust Deed?
You must have lived in Scotland for a year before you apply for a Trust deed. You should also have a cumulative debt of not less than £5,000 to be eligible for a Trust Deed. You should also have a monthly income, from which you can pay a certain agreed single amount per month towards the payment of your loans. Obviously, you should also be insolvent. It should be clear that the liabilities of your loans are overwhelming, given your income and assets. Your assets such as property, motor vehicles, pension, and savings are factored in when determining your financial position.
How does the Trust Deed work?
A trust deed is drawn after a lengthy discussion between the Insolvency practitioner and the client. Here, the Insolvency Practitioner sets the terms of the deed by considering your financial position Vis-a Vis you’re the liabilities of your unsecured loans. Personal loans, overdrafts, Pay day loans, and credit cards are some of the major forms of unsecured borrowing that can be covered by a Trust Deed. Mortgages and student loans are also covered. Joint debts are allowed too, but a Trust Deed covers a single individual, not a group. Whichever unsecured loans you have, your Insolvency Practitioner calculates the amount of a single monthly installment that you can afford to pay comfortably. The draft of the deed is then forward to the listed creditors for approval. Once it is approved, a Trust Deed protects the interests of the borrower by law. It prevents creditors from taking a legal action, freezes interest charges and safeguards your assets. It gives you peace of mind in knowing that you can pay your loan slowly for four years or more. However, creditors must not accept the Trust Deed proposal. They have a right to reject it. If it is rejected, you can consider the Debt Arrangement Scheme (DAS) or sequestrat6ion possible alternatives.
Advantages of Trust Deeds as compared to other debt relief alternatives
The Trust Deed offers a fixed payment term of 4 years. You can, however, negotiate for a longer repayment period. One of the greatest advantages of the Trust Deed over the DAS is that with the Trust Deed, any outstanding debt amount after the last installment is written off. With the DAS, you have to continue paying your loan until the last penny is paid. Additionally, while the DAS, Trust Deed and Sequestration all stop creditors from taking a legal action against the borrower, you should have a minimum debt of £5,000 to be eligible for a trust deed. You are also not required to pay an application fee for the Trust Deed like it is with the DAS. Overall, the Trust Deed is a cheaper and convenient way of clearing your debt and regaining financial stability.