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Write off debts with Scottish Trust Deeds - 03/09/2009
Trust Deeds are like IVA in Scotland. For the Scots, Scottish Trust Deeds are a sure shot way to come out debts. This is applicable only for the Scottish Residents. A Scottish Trust Deed is a formal arrangement between the debtors and creditors to clear all the debts. Scottish Trust Deeds are a very powerful legal tool that can restore your financial equilibrium. You can opt for a Scottish Trust Deeds if you are in a severe debt problem. There are two types of Scottish Trust Deeds:
- An unprotected Trust Deed
- A protected Trust Deed
Debtors generally resort to a protected Trust Deed. The repayment period for a Scottish Trust Deed is usually 36 months or 3 years. You need to pay back a set amount every month for three years. After this your creditors will be legally bound to write off all your remaining debts.
A protected Trust Deed requires fulfilling a few legal formalities. A protected Trust Deed stops your creditors from going to the court to declare you a bankrupt. In a Scottish Trust Deed, you transfer your assets to a trustee who is usually an accountant or a qualified insolvency practitioner. Now your trustee will take charge of your assets and tries to sell them to pay off tour debts. However, essential household items are excluded. Once you are in a Scottish Trust Deed, you are legally bound and all your interest charges are frozen. Hence no legal action can be taken against you.
All your Trust Deeds expenses are paid out of your assets that have been transferred to your trustee. A Scottish Trust Deed also includes a part of your income. This goes to your creditors for a specified period. Scottish Trust Deeds are advantageous to debtors because their repayment amount is based on their financial capabilities.
After determining your financial status, the trustee will draft a trust deed. It is the trustee who decides on the amount a debtor can afford after considering the normal living expenses. Now the trustee will publish your Trust Deed proposal on the Edinburgh Gazette to intimidate all your creditors. The creditors get a time period of 5 weeks to respond to this deed either by accepting or by raising an objection. If none of the creditors object within 5 week, the deed is deemed to be a protected Trust Deed. If you offer a minimum of 10 pence for every £1, creditors will never raise any objections. If you have creditors who have lent you more than 33% of the total amount, the trust deed proposal becomes legal. Once the creditors accept your Trust Deed proposal, your trustee will carry out rest of the formalities and will be dealing with the creditors. No you cannot be dragged to court or charged any interest.
Advantages of a Scottish Trust Deed:
- A Trust Deed ensures that your creditors will be legally bound by the arrangement even if they have raised an objection.
- You will be debt free within 3 years
- A Scottish Trust Deed has few restrictions as compared to a sequestration.
Disadvantages of a Trust Deed:
- In a Scottish Trust Deed, any assets such as equity in a property will be taken into account. So you must have a discussion regarding this with your insolvency practitioner.
- Once you are in a Trust Deed, anything you acquire or win like a lottery or an inheritance goes to the trustee.
- Not only are the creditors bound by the terms of the Trust Deed, even you will have to abide by it. An insolvency practitioner can also petition for your sequestration or rather bankruptcy in Scotland.
