A Scottish trust deed is a debt solution that has been established in law by the Scottish Government to help people who find themselves unable to repay their debts within a reasonable timescale. It is a formal process designed to help people resolve their debt problems and make a fresh start.
The basis of a trust deed is to allow people to agree a fixed payment with their creditors that would normally last for four years and at the end of the four year period the remaining debt would then be written off. This enables creditors to receive a proportionate share of the agreed amount to be paid and thus makes a contribution to the debt owed. It also enables the debtor to agree a payment that they can afford and put their life back on a normal footing away from the pressures of unresolved debt problems.
The trust deed process
A trust deed starts off as a voluntary agreement between the debtor and those who are owed money and the amount to be repaid has to be proposed to the creditors and then accepted by the creditors. The process is administered by an appointed Trustee who must be a licensed insolvency practitioner. The trustee is responsible for ensuring due process is followed and the terms and conditions of the trust deed are implemented and adhered to. It is important to understand that a basic trust deed does not bind the creditors to its terms unless they agree to it.
As part of the legal process though, a standard trust deed can become a protected trust which then places legal obligations on the creditors as they are then bound by its terms and are not allowed to pursue the money they are owed or take legal action against the debtor. This is all on the basis that the debtor complies with the terms of the trust deed but the important aspect here is that a protected trust deed provides protection for the debtor.
The trustees responsibilities includes negotiating the payment terms and ascertaining what assets the debtor has that can be realised to pay the creditors a part of what they are owed. The trustee has the authority to propose methods to protect the debtors home and consider, based on value and the classification of essential assets, what other possessions the debtor can keep. It is obviously important that the agreed payment to be made to creditors is affordable to the debtor to ensure the debtor can fulfil their obligations for the full term of the agreement and therefore realise the benefits of this effective debt solution.
A protected a trust deed in Scotland is a proven and effective debt solution that provides a structured approach to resolving serious debt problems. The key to its effectiveness is as follows:
• The debtor pays what they can afford for an agreed period of time
• The creditors have the opportunity to agree or not to the proposed payments
• Once the trust deed becomes protected it is legally binding on all parties
• The debtors house can be protected as can other assets such as a car
• As long as the debtor abides by the terms the agreement will run its course and the debtor will be debt free at the end of it
There are many people every year who enter into a trust deed in Scotland and it continues to be an effective solution that works in the interests of all parties.