If you’re a Scottish resident and you’re struggling with unsecured debts that you can’t afford to repay in full in a reasonable period, there is an approach that could help you.
A Trust Deed is a legally binding form of insolvency, available exclusively in Scotland.
The pressure of having debts that you’ve lost control of, especially in the current climate when many of us are getting by on tight budgets, can be tough, which makes it all the more important that you get the professional advice you need as soon as you can – so you can find the best approach for you.
Let’s take a look at how entering a Trust Deed could help you regain control of your unsecured debts at a pace you can manage.
What is a Trust Deed?
A Trust Deed is a formal insolvency solution, designed to help people repay whatever they can afford towards their unsecured debts. On successful completion, your lenders will actually write off whatever part of the debt you can’t afford to repay.
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What are the benefits of a Trust Deed?
A Trust Deed could be agreed with your unsecured lenders, if they consider it the best way of getting back a decent amount of what you owe overall.
Once a Trust Deed is agreed, you will:
• Make reduced monthly payments, based on whatever you can afford to repay after you’ve covered your essential outgoings
• Stop any further legal action from your unsecured lenders
• Have whatever debt you can’t afford to repay as part of the agreement written off on successful completion – usually after 3 years.
Furthermore, if you’re a homeowner, you should be able to stay in your home, as long as you stick to your side of the agreement. However, you may have to release some of the equity in your home so you can repay your lenders more of what they’re owed.
A Trust Deed will affect your credit rating for six years from the day it begins.
How could I set up a Trust Deed?
As it’s a form of insolvency, a Trust Deed requires an Insolvency Practitioner (IP) in order to be set up.
Basically, if all your other options have been assessed and a Trust Deed is found to be the best option for you, the IP will go through your finances with you and use this information to draw up a Trust Deed ‘proposal’ with you.
This document will show your lenders exactly how your Trust Deed will work (e.g. how much you’ll repay every month and for how long). Your Trust Deed proposal will then be sent to your unsecured lenders (and the details advertised in the Edinburgh Gazette), and unless more than half of your lenders (or lenders who account for more than a third of your debt between them) reject it, your Trust Deed will become protected by law.
Is a Trust Deed right for me?
There are various debt solutions available in Scotland, depending on what situation you’re in. Even if a Trust Deed isn’t suitable for you, another approach – such as the Debt Arrangement Scheme (DAS) – could help you.
You should always get professional debt advice before making a final decision.