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If you have ever wondered what a trust deed is, you have come to the right place. A Scottish trust deed allows an individual to settle their debts for a fraction of what they owe by entering into a repayment agreement where they pay what they can afford for a predetermined time period, after which the remainder of the debt is discharged. This allows the individual to write off a significant portion of their unsecured debt after making on-time payments for a number of years.
How Can I Get A Trust Deed?
Trust deeds are for individuals that have unsecured debts of £5k or more and are having difficulty keeping up with the payments. You must be a resident of Scotland to take advantage of a Scottish trust deed agreement. To qualify for a trust deed agreement, you must also meet a stringent set of requirements, including income and asset requirements.
Working with a debt adviser, you will open your financial books and work out the amount that you can realistically afford to pay each month towards the repayment of your debts. Your mortgage payment, car payment, and regular living expenses will be taken into account for the repayment calculation. The minimum monthly repayment amount is typically £150.
If you meet all of the necessary requirements, a qualified Insolvency Practitioner will set up and administer the Trust Deed, acting as your Trustee and communicating with your creditors to reach an agreement that will satisfy your debts. As long as at least 51 percent of your lenders agree to the terms, the trust deed can be put into effect and your debts will be placed under a “protected” status, meaning that your lenders cannot take any action against you legally for your debts while the trust deed is active and the payments are current. It generally takes between 5 to 6 weeks to complete the process of setting up a trust deed.
Once the trust deed is in effect, the interest and other charges associated with your debt are frozen, so the debt balance cannot get any higher. Trust deeds typically have a term of 48 months and during this time period, you will not be allowed to obtain any additional credit products. At the end of this time period, the remaining debt is written off and discharged, allowing you to start anew with a clean slate financially. If you fail to make the full payments for the full term, the Insolvency Practitioner has the option to freeze your bank account and can apply for you to be sequestrated.