At a particularly desperate time it may seem like there is no way out of bankruptcy, no formal alternative which would allow for proper resolution. Luckily, Scottish Trust Deeds offer just that possibility, allowing a formal alternative for Scottish resident to be able to get back to a normal financial situation by being able to clear whatever debts have accumulated over time.
A Scottish Trust Deed will allow you to negotiate a fixed monthly fee which will be payable over a period of four years normally. This will be arranged with all your unsecured creditors and will allow anyone with problems to eventually get back on their feet. The whole process will be arranged by someone called an Insolvency Practitioner, who will determine what the best monthly payment and repayment period is depending on your particular situation.
Debts which are repaid by a Scottish Trust Deed are those that are not be backed by any assets such as a property.
How Scottish Trust Deeds work
The Insolvency Practitioner is responsible for drawing up the proposal to be presented to your creditors which outlines your financial circumstances and proposes a fixed monthly amount and the time it will be repaid in. Creditors will look at the proposal in a formal meeting, and they will decide whether to accept or refuse the proposal by voting. In order for a proposal to be accepted the majority of creditors have to agree to it, or creditors who represent a value of over 33 percent of the total debt have to agree.
The Trust Deed will be considered protected once it is finally approved and entered on the insolvency register, and every creditor will be legally bound by it. This includes even the minority of creditors who haven’t approved it. The agreed amount will then be paid by the debtor to the trustee who will divide the amount amongst all creditors. Eventually the debt will be paid off and the trust deed will be terminated.
It is important to note that if the trust deed is unprotected further action can be taken by the creditors. It is always advisable to seek Trust Deed advice to find out if it is the right solution for you.
Who can benefit from a Trust Deed?
This type of agreement can be hugely beneficial for those who are genuinely struggling with their debt to the extent that they can no longer afford to meet their commitments. The agreement also has the benefit that the debtor only has to make a single monthly repayment (to the Insolvency Practitioner) rather than having to deal with all the creditors. Furthermore, interest and charges stop and the repayment is fixed for the agreed period.
A formal Trust Deed offers a flexible solution to take account of changing financial circumstances. So for example, if your income took a significant drop because of a change in job then there is scope to agree a reduced payment or even a holiday period from repayments to give you the time to get back on your feet.
A Trust Deed also provides protection for the debtor once it is protected and all harassment in the form of calls, letters and visits from creditors comes to an end. If they do not abide by the terms of the Trust Deed then the Courts can take legal action against them. This provides peace of mind for the debtor and assists in reorganising their financial situation positively with a view to moving on to a debt free life.