There's two types, a voluntary trust deed and protected trust deed. Because the name suggests, a voluntary trust deed is made under agreement with the creditors and isn't legally binding unless the creditor agrees towards the terms. The protected trust deed is stricter; it is forced on all creditors and it is binding regardless of their statements. Failure to agree bars the creditor from enforcing their debt in almost any other way.
A common way that creditors use to enforce their debt is sequestration. Scottish law defines sequestration as taking the debtor's estate or seizure of the property by court order for the benefit of the creditor as settlement for any debt owed.
Why You Should Consider Trust Deeds
Using a trust deed guarantees both parties of a settlement. When the period of payment (Three years) is complete, the creditors have to write off any unpaid balance because it is considered to be fully settled.
This is an effective debt control tool for many Scottish people; it will help clear existing debt and controls future debts. Monthly obligations are not standard; they're set based on the capacity of the debtor to pay for. Once in full effect, all interest pegged on the debt is frozen. Additionally, it removes the creditors out of your hair after expiry; they can't take any law suit against you afterwards.
The Risks Involved
A trust deed is not risk free; it has a level of commitment on your end. Some of the associated risks include damaging your credit score especially after the term has expired. It is therefore important to evaluate whether it's worth the risk. Another risk that's associated is you may have to release equity from your house to help in the monthly payments.
There is also a disclaimer which should it fail; the liability for payment from the debt balance and also the fees and charges incurred by the insolvency practitioner rests solely on you. This may also lead to eventual sequestration and a possible refusal to become discharged in the trust deed.
Associated Costs
If this is the preferred path to take instead of face sequestration, there are applicable fees. The costs include debt arrangement schemes, certain managing debt plans and sequestration. Additionally, it depends on how much you owe and how many creditors should be covered by the deed. Extra costs are the insolvency practitioner fees and expenses.
Author Resource:-
If you feel that you might be eligible for an a protected trust deed the first thing you should do is pick up the phone and call us on 08002 800 492 or visit www.moneyadvicegroup.co.uk/trust-deeds and trustdeedscotland.uk.com for more information.
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