If you live in Scotland and are struggling with debt, then you might want to consider entering into a Protected Trust Deed.
A Trust Deed can be an extremely useful tool if the following apply:
- You have debts of at least £5,000.00
- You have enough money to make a realistic monthly repayment to your creditors (you will need to evidence this to your chosen advisor/trustee – for example, by producing pay slips or evidence of other regular income).
- You have belongings and/or property which could be sold to release funds (for example, a car, house or savings).
What are the key advantages?
There are many advantages of entering into a Protected Trust Deed. These include the following:
- Once the arrangement has been set up then your creditors won’t be able to contact you directly. This means that all your reminder letters, phone calls and even home visits will cease with immediate effect. This in itself is considered to be a huge advantage of entering into a Trust Deed since someone else manages all creditors on your behalf.
- Your chosen advisor will most likely recommend that you apply to the Accountant in Bankruptcy for what is known as a ‘moratorium’. This lasts for a period of 6 weeks and means that your creditors can no longer take any enforcement steps against you – for example, by freezing your bank account. This course of action usually takes place at the very beginning of the process as you can only apply for one moratorium in any 12- month period.
- Unlike bankruptcy (or ‘sequestration’ in Scotland) you won’t have to prove that you’re unable to pay your bills. You might hear this referred to as ‘apparent insolvency’ but your advisor will be able to give you more information about it if needed.
- Whilst you may find it difficult to obtain credit whilst you’re repaying creditors under a Trust Deed, you’re not legally prevented from doing so. In fact, some creditors even consider that Trust Deeds are a responsible way of dealing with debt and will offer certain credit options. However, do bear in mind that the interest rate is likely to be much higher than the standard rate.
- If you’re employed in certain roles then a Trust Deed shouldn’t affect your contract of employment (as it would do in a bankruptcy situation). However, you should be sure to ask your advisor about this and also obtain a copy of your contract to ensure that you don’t have to declare the arrangement to your employer. Unfortunately, this can cause a catch-22 situation for some; i.e. if they lose their employment then they won’t be able to make monthly repayments.
- Finally, another key advantage of a Trust Deed is that, at the end of the arrangement, any remaining debt will simply be written off and creditors can’t legally pursue any balance from you. Consequently, this means that you’ll be completely debt free and in a much better position to start rebuilding your financial future.
