Trust Deed Scotland Advice

Trust Deed Scotland

Trust deed is a solution for debt though it is available only to people residing in Scotland. It is a solution to people who can repay some but not all off their debt and it is not as damaging as bankruptcy which is still suitable for some who can no longer pay back debt without continuing to pay back more.

The words used to describe it are “Scottish trust deed” or a “protected trust deed”.
Before signing a person is promising to pay what they can reasonably afford towards their debt on a monthly basis. This amount will be agreed between both parties. Also people with assets (Commonly equity in property) will need to contribute the asset value in to the trust deed in lieu of the asset value.

They usually continue for three years, and by the end of the term all funds will have gathered in the trust deed. The funds that have gathered will first pay the fees of the trust deed and then each creditor will receive a dividend. If any creditors do not receive a dividend the debt must be written off legally and the creditors can no longer collect them.

For a lot of people in Scotland there disposable income is getting smaller quickly. The price of living has rised dramatically with the price increases in food, gas, electricity and fuel all on the increase. With many wages been frozen and job being lost the pressure to pay debt has never been so high but with money simply not there it is becoming harder and harder to pay the creditors.

With mortgage rates at an all time low this does help however this only leads us in to a false sense of security for when they do rise 8 million people will be affected. Putting even more pressure on the household budget.
If there is no money left to pay the creditors we are in danger of a "debt spiral". The only way to explain this is using creditors to pay creditors. If this did happen the level of debt will increase rapidly.

A trust deed can stop this "debt spiral". The payment into a trust deed depends on an individual’s personal finances and after doing an income and expenditure and taking of priority debt and living cost. Also making sure they have a realistic amount to live day to day without any further borrowing.

The golden rule is to seek help as soon as there is a problem always use a charity the sooner you seek help the more options will be available. For some a Trust deed will be the perfect solution it will not suit everyone so seek advice as soon as you foresee problems .

"Can I enter a Trust Deed"?

The Protected Trust Deed is only available to people living in Scotland with serious debts. 

What is a Trust Deed?

A Trust Deed is a legally binding arrangement between someone in debt and their creditors. A licenced insolvency practitioner is required to administer the solution. The Trust Deed is legally binding which means, if accepted, both you and your creditors would have to adhere to the terms of the Trust Deed for the full period (usually 36 months). The Protected Trust Deed is an insolvency solution for people who cannot afford to pay their contractual obligations to their debt as they fall due.

The process to enter a Protected Trust Deed is as follows

1. Contact a debt advice charity to ensure a Protected Trust Deed is the right advice. 
2. If it is you would need a licenced Insolvency Practitoner to adminster your case (there are a number of insolvency practitioners in Scotland)
3. The insolvency practitioner would create a proposal and send it out to all of your creditors. The proposal would include how much you propose to repay and over what period of time
4. A notice is placed in the Edinburgh Gazette about your Trust Deed
5. After 5 weeks, if less than a 1/3 in value or a majority in number DON'T object to the Trust Deed it will have gained Protection.
6. The insolvency company will then register your Protected Trust Deed with the Accountant In Bankruptcy.

Each year your insolvency company will review your Protected Trust Deed to ensure the payments are still manageable. The Protected Trust Deed is flexible so your payments can increase as well as decline depending on your available income.

You cannot enter a joint Protected Trust Deed as the debt solution is individual. This means a husband and wife would need to enter individual Protected Trust Deed's. The insolvency company may decide to enter one Edinburgh Gazette advert as this would save money on the case.

General criteria to enter a Trust Deed?

• Must owe at least £10,000 of unsecured debt
• Must be able to repay at least 10% of the unsecured debt over 3 years (excluding the insolvency practitioner fees - ranging from £2,000 to £6,000).
• If your equity from an asset (house, car etc) plus 36 monthly payments is more than your total debt then a Protected Trust Deed would not be the best debt solution.
• You must have at least 2 different creditors. 

Positives of the Trust Deed?

There are positives and negatives to entering a Protected Trust Deed and you should always seek professional advice prior to entering any debt solution.  

• Benefit 1: You can make affordable repayments towards your debts instead of trying to rob Peter to pay Paul.
• Benefit 2: You will write off some of your debt (typically 50%).
• Benefit 3: You can be sure of when the Protected Trust Deed will end (usually 3 years but your insolvency practitioner would inform you of this).
• Benefit 4: A Protected Trust Deed is a formal agreement for both you and your creditors which must be adhered to.
• Benefit 5: The Insolvency company will manage all creditor correspondence on your behalf.
• Benefit 6: Once your Protected Trust Deed has been agreed with your creditors they cannot change their mind at a later date, giving your security and protection.

Negatives of the Trust Deed?

The negatives of the Trust Deed should be considered extremely cautiously before proceeding. These include;

• Negative 1: It's legally binding so you will have to continue to make payments to your Protected Trust Deed, even if you don't want to continue.
• Negative 2: If you decide to stop paying your Trust Deed your Insolvency Practitioner would have a legal obligation to proceed with Bankruptcy.
• Negative 3: You can only include unsecured debts in your Protected Trust Deed - any others, such as your mortgage cannot be concluded. If you fail to maintain payments to secured debts then the items can be repossessed.
• Negative 4: A default will be added to your credit file and will last for 6 years. 
• Negative 5: Your house / flat is typically secure, however any equity would need to be released to enter into the Trust Deed. 
• Negative 6: You cannot obtain further credit whilst in your Protected Trust Deed.

Trust Deed Case Study

Steven (29) and Dawn (31) from Dundee have two children and entered into a Protected Trust Deed. They didn't have a car and they lived in a housing association. Their debt was £15,000 each and they planned to pay £170 each.

Evan (43) from Glasgow entered a Protected Trust Deed with £42,000 debt and a disposable income of £350. Evan also had equity in his property of £7,000 which he had to release via remortgage. In 3 years Evan will be debt free and discharged from his Protected Trust Deed.

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Top Trust Deed Areas

• Glasgow
• Edinburgh
• Dundee
• Falkirk
• Inverkeithing
• Stirling
• Aberdeen
• Kelso

Protected Trust Deed Statistics

A protected trust deed is a legally binding agreement between a person in debt and their creditors. This video shows which area were highest for protected trust deeds in the last year. This statistics and the protected trust deed checker can be found here http://www.debtsupporttrust.org.uk/how-can-we-help/protected-trust-deed 


or here for the checker

http://www.debtsupporttrust.org.uk/media/37787/protected%20trust%20deeds%202010-2011%20checker.xls

Debt Solution - Protected Trust Deed

Protected Trust Deed is a debt solution which was introduced 1985 and has had a range of changes since then. A protected trust deed was introduced to help people pay as much of their debt as possible and stop them having to become sequestrated. This option is only available to people who reside in Scotland the English, Welsh and Irish equivalent is an IVA.

 

If someone meets the criteria and wishes to go ahead with a trust deed then an insolvency practitioner (I.P) will collate all the relevant documents. Once the I.P has all the documentation they will advertise the trust deed in the Edinburgh Gazette in order to let all creditors know about the proposal. If 1/3 in value or a majority in number of creditors do not refuse the offer then the trust deed becomes protected. Before considering a protected trust deed it is important to understand the criteria, positives and negatives of this solution.

Criteria

• Need to be able to make a monthly payment to your creditors of at least £125
• Unsecured debt must be £10,000 or more
• Need to be in full time employment
• need to be able to repay a minimum of 10% of the money borrowed over the course of the protected trust deed to your creditors

Positives of a Protected Trust Deed

•  Only one monthly payment to the debt
• Interest and charges will be frozen, Unless the Protected Trust Deed fails at any stage, or you receive a windfall, then it is a requirement that interest and charges are repaid.
• Will not have to liaise with your creditors as the insolvency company will do this on your behalf
• Once a Trust Deed is signed it become protected and therefore means you and the creditors will be legally bound by the agreement, which means if the agreement is complete you will be debt free.
• A homeowner may be able to retain their property, the Insolvency Practitioner will only be interested in any available equity
• Will have less of an effect on a persons credit rating than if they entered sequestration

Negatives of a Protected Trust Deed

• If there is any available equity within a property this may have to be included in the Protected Trust Deed proposal
• A Protected Trust Deed may adversely affect a persons credit rating
• Employment contract may not allow someone to enter a Trust Deed - they would need to check this with their employer
• If someone enters a Trust Deed and does not meet the terms of the agreement they are likely to face Sequestration
• A person will have their income and expenditure reviewed regularly and their monthly payments could fluctuate up as well as down

Protected Trust Deed and IVA - 'Clear Debt'

A common problem within the debt industry is the lack of clarity around debt solutions. Some websites state that it's "Easy to write off 100% of your debt" and "become debt free today". The Office of Fair Trading is clamping down on firms stating that this is possible. This article examines the truth behind the solutions where you can repay a percentage of your debt, with the rest being cleared at the end of the solution.

The debt solutions people talk about when it comes to 'writing off debt' includes the IVA and Protected Trust Deed. If you are made bankrupt you will also clear the debt you cannot afford to repay. All of these debt solutions will negatively affect your credit rating because of the default. A default on your credit rating will last for 6 years.

The IVA debt solution

The IVA (individual Voluntary Arrangement) typically lasts for 5 years and you would repay a percentage of your debt. The minimum repayment over the 5 years must be 25% however most people repay a lot more. The proposal is put to your creditors at an official meeting and if they accept the proposal your IVA will be in place. The criteria for an IVA is

- debt of at least £12,500

- minimum disposable income of £200

- at least 3 different creditors

A key criteria for the IVA is that your equity (value of your house minus what is owed to your mortgage lender) within your property does not exceed your debt and 5 years of monthly contributions.

The Protected Trust Deed solution

The Protected Trust Deed is similar to the IVA but is only available to people living in Scotland. There are legal differences between Scottish law and the rest of the UK when it comes to debt.

The Protected Trust Deed would last for typically 3 years and at least 10% of the debt must be repaid over the course of the solution. The Trust Deed is signed and advertised within the Edinburgh Gazette. After 5 weeks, if there are no objections (or less than a majority in number or a third in value) then your Trust Deed will be Protected. The criteria for a Protected Trust Deed is;

- debt of at least £10,000

- Minimum disposable income of £150

- at least 2 different creditors

If you have a house with equity then the money tied up in your house should not outweigh your debt and 3 years of monthly contributions.

There are websites, TV adverts, newspaper columns and leaflets which claim to offer miracle solutions to deal with debt. The truth is that "clearing your debts" is not as simple as it's suggested but there is a route to resolve all debt problems. It's essential when dealing with debt you speak to a not for profit charity with qualified debt advisors who can provide you with honest, transparent debt advice.

There are a number of ways to find debt charities you can trust, including using Google and searching for debt advice charity or even speaking to friends and asking for their help.

Debt Support Trust is a registered debt charity providing debt advice on Protected Trust Deeds and IVAs. The charity offers a wide range of support from benefits advice through to help with bankruptcy advice.

Scottish Debt Solution - Protected Trust Deed

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.

Introduction To Trust Deeds

A large number of people in Scotland are entering the Protected Trust Deed debt solution. This is known as the IVA in England, Wales and Northern Ireland. Last years almost 8,000 people entered a Protected Trust Deed to resolve their debt problems. In this article we'll explain who is suitable for a Trust Deed and who would not meet the criteria

What is the criteria?

You must;

- Be able to repay at least 10% of the money you borrowed over a 3 year period

- Owe at least £10,000 unsecured debt

- Be able to pay £150 towards your debt each month

An example of a Trust Deed

Steven from Glasgow is 30 and married to his wife Karen. Steven has 5 debts (2 credit cards, 2 store cards and an overdraft with his bank) which totals £30,000. Karen has an overdraft totalling £1,500. Steven and Karen has a mortgage which has £100,000 outstanding. The value of the house is roughly 100,000 - there is no equity in their house.

Steven works full time and earns £1,300 each month after tax. The monthly expenditure for Steven is £1,000. So, Steven has £300 disposable income available to pay his debts each month.

The problem is that Steven's monthly contributions to his debts are £800. As a result, Steven is having to borrow money from other credit cards to meet his money payments. A debt management plan is one solution for Steven. If he managed to freeze his interest and charges he could have his debt repaid in just over 8 years. There is also a solution called a debt arrangement scheme (Scotland only) where he could enter a legally binding debt management plan type solution.

Steven would also be applicable for a trust deed as well as sequestration. The Trust Deed would see Steven repay an estimated 30% of the debt he borrowed over a three year period. If he completed the solution he would see his interest and charges, along with the rest of the money he owed, being cleared. Sequestration would also be an option for Steven, with Steven being discharged after one year from the Sequestration. As Steven has available money he would be asked to make a contribution towards his debt for a total of three years.

All debt solutions will negatively effect Steven's credit rating.

When would the Trust Deed not be applicable

Steven would not be suitable for the Trust Deed or Sequestration if the equity in his house was more than his debt. Karen would be entitled to half of the equity in the house, however if Steven had £50,000 equity in his house, then he would be entitled to half of this (£25,000).

The £25,000 along with 36 monthly payments of £300 towards his debt would see Steven repay more money than the actual debt he had

Protected Trust Overview

There are a number of ways to become debt free for people in Scotland, including general money advice, debt management plan, Protected Trust Deed, refinancing or Sequestration.. One way in which people can solve their debt problems is with a Trust Deed.

What is a Trust Deed?

A Trust Deed is a formal, legally binding solution only available to people living in Scotland. The English, Welsh and Northern Irish alternative would be an IVA. In a Trust Deed you would repay arrangement a percentage of your debt at an affordable rate over a fixed period of time. A Trust Deed will usually last for 36 months however it can last for up to 60 months. If you complete your Trust Deed you will have a percentage of your debt cleared. Anybody entering a Trust Deed will be asked to make a monthly payment of at least £150.  At the end of the solution the money you have paid will be distributed to your creditors on a pro rate basis.  The disposable income paid each month is assessed based on your income and expenditure. 

The Trust Deed process?

If you think a Trust Deed  is right for you then you should consider speaking to a debt advice charity who can point you in the right direction. You would sign the Trust Deed which would then be offered to your creditors. The Trust Deed is also advertised in a publication called the Edinburgh Gazette. If your creditors accept the proposal your Trust Deed will become legally binding and ‘Protected’. The Protection binds both  you and your creditors to the Trust Deed terms.

What’s the criteria for a Trust Deed?

You must;

- Be able to repay at least 10% of the money you borrowed over a 3 year period

- Owe at least £10,000 unsecured debt

- Be able to pay £150 towards your debt each month

Benefits of a Trust Deed?

There are advantages and disadvantages of a Trust Deed. You will asked to make one affordable payment towards your debt each month. The arrangement made in the Trust Deed with your creditors will last for a certain amount of time and it will be fixed so you can see the ‘light at the end of the tunnel’. As long as you fulfil your end of the agreement all interest and charges will become frozen and written off  at the end of your solution. Another benefit is your creditors can  no longer take any action against you once the Trust Deed is Protected. You will only repay a percentage of the money you owe – a minimum of 10%  however the more you repay the more likely your creditors are to accept your proposal.

What are the disadvantages?

There are a number of disadvantages to a Trust Deed. Your credit file will have a default on it which will last for 6 years. This would mean obtaining credit in the future will be difficult. You will generally be able to retain your property, however you will have to release any equity within your assets. You will not be able to remain as a director of any organisation and would have to relinquish this position in a Trust Deed. You may need to sell your cars and downsize, however this is evaluated on a case by case basis. Any assets you own worth over £1,000 may need to be sold or the insolvency practitioner may look to release the equity.

How do I get a Trust Deed?

In 2010, over 9,000 people entered a Protected Trust Deed. The Trust Deed is not suitable for everybody however for people with serious debt problems it may the right option. To get a Trust Deed you first want to make sure there are no other solutions to debt which would be less harmful to your credit rating. The best people to speak to about a Trust Deed is a debt charity who will give you independent advice.