Professional solutions from experts in bankruptcy and debt.
Tailored solutions for individual needs
Debt solutions from qualified experts
Speak to licensed insolvency practitioners
A protected Scottish Trust Deed is an official and legally binding agreement that is formed between an individual and his or her creditors and is overseen by a trustee. This is used to assist you with working your way out of an excessive amount of financial debt if you have been struggling to meet your monthly obligations in this regard. Only a licensed insolvency practitioner will be able to arrange and administer a Scottish Trust Deed.
Just because you have found yourself unable to repay all of your creditors, it does not mean that you will automatically qualify for a Scottish Trust Deed. Two of the main criteria to qualify are that you will have to be a resident in Scotland and you will need to owe at least £5,000 to various creditors before being allowed to apply. It is important to remember though, that a Trust Deed can only be approved for an individual estate.
Another point to keep in mind is that you will need to have a consistent weekly or monthly income or have someone on hand that will be willing to guarantee that they will be repaying some or all of your outstanding debts.
The shortest amount of time that a Trust Deed will remain in force for is 48 months or four years. Depending on your personal circumstances and the amount of debt you owe, there may be cases where it could last for longer than this. However, your insolvency practitioner will be able to provide you with more information in this regard after assessing your financial situation.
Once you are under the protection of a Trust Deed, you will be able to use this as a highly effective tool for regaining your financial stability. In short, a Trust Deed has been formulated for people who have gotten into too much consumer debt and are now struggling to repay it each month.
Provided that you have consistently met all of the terms of your Trust Deed for the full duration, you will then be discharged from any outstanding unsecured debts and obligations that were included in it.
After you have completed all of the required paperwork and provided it to your chosen Trust Deed Company, they will start processing your application. Although approval or decline can sometimes take as little as five days, the average processing time for this is normally between six and eight weeks. However, the quicker you provide all of the required information, the faster your application will be processed.
When you initially sign your Trust Deed, you will nominate a Trustee, who is a qualified insolvency practitioner. They will then notify the Accountant in Bankruptcy (AiB), who will enter all of your information on the Register of Insolvencies.
Within seven days, the Trustee has to notify all of your unsecured creditors and provide them with copies of your Trust Deed, the Register of Insolvencies entry, a detailed statement of affairs and a claim form. This will provide your creditors with information pertaining to your current financial situation, any assets that may have been excluded from the Trust Deed, payment arrangements that you have agreed upon and the likely outlays and distribution prospects.
Your creditors will then have up to five weeks from the date that your information was entered on to the Register of Insolvencies to lodge any objections with regards to the Trust Deed becoming protected. Any creditors who do not respond are treated as having agreed to the Trust Deed becoming protected.
Your Trust Deed will be classified as being protected from the time it has been recorded in the Register of Insolvencies. This means that you will be discharged from any outstanding debt that has been included in the Trust Deed after 48 months, provided that you have complied with all of your obligations during this time.
After a Trust Deed has been granted, you will be legally bound by it to make the agreed upon repayments each month for the full duration of it. During this time, you will not be allowed to apply for or obtain any additional credit until such time as the Trust Deed has come to an end.
After the Trust Deed term has ended, you will be discharged from any of the debts that have been covered by it. However, you will need to keep in mind that while you may be able to obtain credit again afterwards, a waiting period of up to two years may apply. You may also be subjected to higher interest rates because you will be considered as a high risk for obtaining new credit.
It is often thought that anyone who enters into a Trust Deed has done so because they have missed on making payments to their creditors. However, this is often not the case because so many people try to take on additional credit to service their existing debts.
No. You will only be required to make the previously agreed upon payments into the Trust Deed itself. Any other related costs will be deducted from those monies before any creditors are paid. In effect, the creditors forming part of your Trust Deed have entered into an agreement to receive less back than what is owing to them to enable your Trust Deed Company to obtain their fees for overseeing this arrangement.
Before you enter into a Trust Deed, there are some points to keep in mind though. If you have purchased a home and it increases in value or if you receive any type of unexpected lump sum payment, you will be required to pay an additional amount towards your Trust Deed. If any amount of money you receive enables you to repay all of your outstanding debts in full, you could also be required to pay another amount that will be used to cover the cost of your Trustee’s fees.
No two Trust Deed cases will ever be the same because everything depends on your personal financial circumstances. As a result, your repayments will be determined by your chosen Trust Deed Company. They will perform a complete assessment of your current circumstances by subtracting your living expenses from the income you are receiving. This will be done in accordance to standard guidelines referred to as the Common Financial Statement.
A figure that you can comfortably afford to repay each month will then be calculated. However, keep in mind that there is in fact a minimum repayment level to meet – if this is too low, the AiB or your creditors will be able to prevent your Trust Deed from becoming protected, meaning that you could end up facing potential sequestration.
The main thing to remember is that you will have to immediately inform your Trustee if you experience any form of financial chances that could prevent you from adhering to the previously agreed upon Trust Deed repayment schedule. They will then work with you to do everything possible and see that you will still be able to complete the duration of your Trust Deed.
Your creditors will no longer be able to contact or harass you while you are in your Trust Deed agreement. All communication with them is handled by your Trustee and they will in turn pass any relevant information on to you You will once again be in control of your finances because you enter into an agreement to only repay what is affordable for you based on your level of disposable income. Payments to all of your creditors are amalgamated into one single manageable payment as well.
During the term of your Trust Deed, your debt will be frozen. This means that no additional interest of lender’s fees will be able to be added to any of the accounts in your Trust Deed Once your Trust Deed comes to an end (normally after four years), any outstanding debt that formed part of it will be written off. However, you will need to keep in mind that if you have agreed to repay your debt by using some of the equity in your home, you may have to be willing to take on extra payments to protect that equity – and this could exceed the four-year period. Your Trustee will discuss all of this with you in more detail though.
Your credit rating will more than likely be negatively affected because the fact that you entered into a Trust Deed will remain on your credit record for a period of six years. Because your credit rating will no longer be as good as it was before, you will find it more challenging and a lot costlier to obtain any form of credit . A Trust Deed may not be a suitable option for people with certain types of jobs. Your Trustee will discuss this with you beforehand though to ensure that you will be suitable
You will still be eligible to apply for a Trust Deed if you are self-employed. All of the standard requirements will apply and you will need to be able to provide proof of your monthly income at the time of application. Although this will usually be required in the form of six months’ of trading accounts from your business, your Trustee can request any information that they deem necessary to ensure that a Trust Deed will be the most appropriate and affordable action for you to take.