Scotland has an independent debt solution for people who face financial problems. It's an agreement between debtors and creditors for a debt repayment. This option was introduced to help people without them having to declare themselves bankrupt and to help creditors regain a portion of the money they are owed.
If a person is on the brink of bankruptcy it would be advised to seek professional help to asses whither they are suitable for a trust deed. The first thing people should understand is how a Trust deeds works, and what the criteria for this debt solution is. If a person has high unsecured debts and are unable to repay these then it could be the best option for them. While a Trust Deed is likely to have a severe impact on a persons credit rating, it is considered a better solution than bankruptcy A person owes 3 creditors a total of £25,000, if this were divided into;
£15,000 is owed to 1st creditor
£5,000 is owed to 2nd creditor
£5,000 is owed to 3rd creditor
This would mean that the 1st creditor would have the majority right and if they refused then it would not be accepted even if the other 2 creditors voted in favour. So long as the creditors agree to accept the payments then the debt solution can begin however they can object the offer within 5 weeks.
A proposal can be accepted if no objection is made or half of the creditors don't object. A creditor is official considered to be notified if a public notice is made in relation to the offer and they don't decide to make any objections. Once the offer has been accepted by the creditor then the trust deed becomes protected because it is then that it is legally binding. Trust deeds are legally binding so as long as a person does not default then the creditors will not be able to change their decision at a later date.
A trust deed can work out well for both the creditors and the debtor because the other solution would be bankruptcy, mean the creditors would get even less. Something everyone must know before going into a trust deed would be that all assets that are unessential to the creditor can be sold by the trustee and included into the trust fund. Commodities or vehicles can be sold if they are not used for work or any other essential need. The amount received from selling these item would then go into a pot before any proposal is made to creditors. If someone has equity in their property then this must be released. Again the money raised from this would go into the pot and once the trust deed is complete then the debtor would be better off then they would have been with an sequestrated. This is because with sequestration the debtor would be forced to sell any asset first. If a person is struggling to get a loan to release the equity then a family member would be allowed to do it on their behalf. Trust deeds help those living in Scotland to pay their debts without having to become sequestrated. While a person is likely to lose assets and possessions with a trust deed, the choice between this and sequestration is one which can't be taken lightly and leaves no choice for those who are in a financial struggle.
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