Is a Trust Deed Right for Me?

The number of people in Scotland who are struggling to pay off debt has increased alarmingly in recent years. Maybe people are finding themselves in a position where they just cannot afford to meet their minimum repayments. They are then faced with threatening letters from their creditors and plenty of restless. It can all mean a lot of stress, and this can take a toll on their physical health. There are a number of solutions that people can choose to help them escape debt. One of the most talked about of these is the trust deed. This is similar to the Individual Voluntary Arrangement (IVA) that is available in England and Wales. The trust deed is only available in Scotland.

How a Trust Deed Works

A trust deed is a legal and formal agreement between you and your creditor for who you are going to pay off your debts. What happens is that a trustee (also known as an insolvency practitioner) will work with you to examine your finances. The purpose of this will be to determine realistically how much you can afford to pay your creditors. This information will allow the trustee to create a proposal which will then be taking to your creditors. If this is accepted you will then be in a legal agreement that both parties will be obliged to stick to. The creditor will not be able to take any further action against you unless you fail to meet your end of the bargain.

The amount that the trustee will propose that you pay back will depend on the amount of disposable income you have each month. You will then use this money to pay off your debts within a time limit of three years; this means that after the 3 years is up you will then be free of debt. In most instances you will end up paying back significantly less than what you actually owe. Of course the creditor will have to agree to the proposal and they are under no obligation to do so. There are only likely to consent to the arrangement if they feel sure that it is the best deal they are going to get. So if you can only offer a small amount of money each month it may be difficult for you to be successful with a trust deed.

The Benefits of a Trust Deed

The benefits of this type of arrangement include:

• You pay back less money than what you owe
• Interest payment will be frozen
• You will be free of debt within three years
• You avoid bankruptcy
• The creditors will stop sending threatening letters

The Disadvantages of a Trust Deed

These include:

• Your credit rating will be affected
• If you fail to meet the terms of the agreement you will be in big financial trouble again
• You will be expected to declare all your assets. If you fail to do this you could be in legal trouble.