Monday, 19 December 2011

Trust Deed Scotland or Sequestration?

Should i enter a trust deed or opt for sequestration?

For people who find themselves with acute financial difficulties and mounting debt problems often the solutions available can be daunting. Dependant on the severity of the problem this may result in sequestration (Scotland) or bankruptcy (rest of the UK), this solution is the most extreme and damaging to an individual who selects this route. In this solution your details with be published in a national paper and your information regarding the sequestration can be found with relative ease on the internet. Any assets you have will most probably be sold in order to realise money to pay towards your debts. This is often a most traumatic experience for a person going through this solution and should only be taken when no other option is suitable. This solution would also force through the sale of your property if you own one and if it had equity within the property, again an unpleasant and traumatic experience to be avoided. This solution also has the most damaging impact of all to your credit rating and will take many years to fully recover. This is because you have defaulted on your loans and been unable to make an acceptable monthly payment to your creditors over a period of time as would be the case within a protected trust deed. As with any debt solution qualified professional advice should always be taken before entering a solution and this is certainly the case with sequestration/bankruptcy. There are also limitations as to positions and jobs you can hold for instance you are not permitted to be a company director whilst you are bankrupt.

Scottish Trust Deed

A Scottish trust deed is another debt solution for people living in Scotland which may be a much better solution. A trust deed or “protected” trust deed lasts for three years and within this time you will contribute as much as you can afford towards your debts. Any outstanding monies due to creditors after the three year period will then be written off and you are free of debt and worry. In order to qualify for a trust deed you must have £10,000 worth of debt and be able to contribute approximately £150 per month. In order to proceed with a trust deed you will require the services of an insolvency practitioner who will complete an income and expenditure in order to identify what assets exist and how much a person can afford to contribute towards their debts.

Having completed this exercise the IP would arrange a meeting of your creditors and assuming they accept the proposal your trust deed would become “protected” after 5 weeks. Your IP would be responsible for your financial conduct over the period of your trust deed and takes the title of trustee. Your trustee would carry out regular income and expenditures to ensure you are contributing the appropriate amount to your debts. This means if your financial position changes you may pay more or less towards your agreement.

Your trustee is also responsible for the conduct of your creditors throughout the term of the trust deed. This means if any creditor continues to harass you during this period you should advise your trustee who will ensure this stops immediately as this is illegal.

Negatives of a Trust Deed

There are negatives behind this solution however as during the term of the protected trust deed you are not permitted to take out further credit .Your credit file will also be damaged for a total of 6 years approximately meaning being accepted for credit or a mortgage during this period would be extremely difficult.

However to regain control of your finances, be able to answer the telephone and finally get a good night’s sleep once again many people find the positives far outweigh the negatives.


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