Scottish Trust Deed (UK)
What is a Trust Deed Scottish Trust Deed?
Trust Deed is a voluntary agreement between the debtor and the creditors in Scotland. It is an alternative to the bankruptcy and an equivalent to IVA for the Scottish residents. It is also known as Scottish Trust Deed.
In this process rights of your assets are transferred to a trustee (a qualified insolvency practitioner) who sells them to pay creditors. The trust deed may also include that you will be paying a portion of your income to the creditors for a specified period. In this process, the debtor pays only what he or she can afford every month after living a regular life.
The trustee or the insolvency practitioner circulates the drafted proposal among all creditors. If a majority of all the creditors approve the draft, the trust deed becomes a legally bound agreement. Here is a detailed article on “Trust Deed procedure“.
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What is a protected Trust Deed in UK?
A Trust Deed can become protected only if 2/3 or more of your creditors (by value) agree to the terms and conditions. Protected Trust Deed prevents the creditor from taking any further action against the debtor (like, filing for bankruptcy). However, if the debtor takes up a new loan after he has signed the trust deed, it will not come under the terms of the previous trust deed.
The 2008 Regulations require trustees to provide additional information:
- A Statement of the Debtor’s Affairs and to complete Form 3. It includes the anticipated contributions from the debtor, expected realisations from assets, the estimated cost of administering the protected trust deed and proposed dividend to ordinary creditors.
- A Statement of Anticipated Realisations from a Protected Trust Deed
Advantages and Disadvantages of Scottish Trust Deed:
If you are struggling with huge amount of unsecured debt, Trust Deed may be a good solution for you. However, you must consider the advantages and disadvantages of trust deed before making any final decision. (Also read: 11 Consequences of signing a Trust Deed)
Advantages of Trust Deeds
- Trust Deed enables the debtor to pay a single amount for his entire loan on a monthly basis
- The tenure of a Trust Deed is thirty six months to the most
- After thirty six months the remaining debt is written off
- Trust Deeds offers more flexibility than bankruptcy
- The debtors have a control over their finances
- The insolvency practitioners deals with the creditors
- No further interest or charges can be levied on the debt after the creditors accept the trust deed
- The debtor can hold some public offices or get self employed
- Unlike bankruptcy, Trust Deed information are not published in the local newspapers
Disadvantages of Trust Deeds
- The credit rating will be affected
- Arrestment will be effective with a Trust Deed. Hence it is important that the debtor discloses complete financial information
- The debtor cannot hold posts of a director in a limited company
- Failing to make payment according to the trust deed can lead the debtor to bankruptcy.
- The details are published in the Edinburgh Gazette.
- If the creditors agree to the trust deed, it is recorded in Register of Insolvencies (public record).
- The trustee will charge for his or her service
