Everything you need to know about Scottish Trust Deeds
The Scottish trust deed is actually a form of debt resolution that is almost identical to the IVA of England, Wales and Northern Ireland. A Trust Deed enables the debtor and creditors to come into a mutual agreement so that it becomes beneficial for both the parties. Though there are some differences between the individual voluntary arrangement and Scottish trust deeds considering rules and regulations, the basic concept of both the programs are almost the same. The Scottish trust deed is prepared for the debtor to avoid bankruptcy and at the same time it becomes convenient for the creditors to attain some payment which would not have been possible if the debtor had been declared as bankrupt. This can be definitely said to be a form of debt help for the residents of Scotland, and can be a good option for you if your debt situation is such that you have no other option than declaring bankruptcy. But a lot of people are not sure regarding the positioning of their assets.
Before we delve deep into the discussion of assets, it is essential to know how the Scottish trust deeds work and also when it should and should not be used by a debtor. If you have any unsecured debts like credit cards, overdrafts or store cards for which you are finding it really difficult to make the complete repayments, then a trust deed is definitely a beneficial solution for you. Again, this may not be helpful in executing the secured debts like loans or mortgages; however, if you are not able to pay the loans as you are trying to make the payment of your credit cards then the Scottish trust deeds will help you in consolidating the unsecured debts and you will be able to maintain your mortgages.
The first step of a Scottish trust deed is to look out for an insolvency practitioner. This person will be appointed as your trustee and initially he/she will determine your overall earnings and expenditure. The essential expenditures like any mortgage, utility bills, council tax, car finance or any other secured loans will be reduced from the income along with an amount that will be sufficient for the living expenses of the debtor. The amount that is left after deducting from all the above mentioned expenses will be divided among the creditors in certain proportions that are owed to each of them.
After that the creditors will be offered the same amount continuously for three years; they will have five weeks to object to the offer that has been agreed initially between the debtor and creditors. If within this period of time no objection is received from any creditor then it is regarded as an acceptance; however, if more than half of the creditors do not object and again if the total objections are not equal to one third of the amount of money you owe, then you can rest assured that your proposal has been accepted and you can start making the payments. Maintain the payments and at the end of three years, all your debts will be regarded as completely paid. You need to understand that this amount may actually be a part of the full amount that is actually owed, so the rest would be written-off.
This amount will be accepted by the creditors if they believe that they will receive even less by enforcing bankruptcy. Thus, in such scenarios the Scottish trust deeds are really beneficial for you.
Now, the factor that a lot of people are worried about is what will happen to your assets. You may have to compromise with certain items that you own to complete the huge amount of debt off your shoulders.
If you have a car that is really not essential for your work then you shall have to sell it and add the amount to the trust fund. The trust is funded initially by the amount that is left after deducting the expenditures as calculated by your insolvency practitioner and also the trustee fees that are agreed with the creditors are also deducted from the fund. Your car will be sold out and that will be added to the fund before making the percentage payout to the creditors; and if you are having any expensive collections like artifacts, expensive portraits, then these will also be sold as anything else that is regarded unessential for you.
If you own a house and have equity on it, then you need to realize the equity. You can sell it and add the profit that will be added to the fund after the mortgage and any other loans on your name has been cleared. But in case of bankruptcy, you will be forced to sell all of them. For obtaining a loan of the sum that is equal to the equity, a family member can help you or your trustee can also help you in getting a secured loan.
The loan that you have attained will be added to the trust and the repayment amount that you have to provide monthly will be reduced as the loan repayment will be taken from the disposable income. Though it is a fact that the Scottish trust deeds will not make you lose your home, at the same time you may not have a huge amount of profit by selling the home. But it is definitely a better form of debt help than declaring the resident bankrupt. If you are declared as bankrupt, it is a loss to both you and your creditor as they will not be able to receive the overall amount and you will be liable to sell all your assets that includes your home, car etc, and in a lot of cases a bankruptcy does a huge damage to the credit rating than a trust deed.
Factors for Qualifying for a Trust Deed in Scotland
Now there are certain criteria for qualifying for the Scottish trust deeds and if you do not meet the criteria then any individual is not allowed to take the help of an insolvency practitioner in attaining a Scottish trust deed. While you are opting for the trust deeds, it is really important that you know all the facts regarding them. For debts greater than £5,000, the trust deeds are applicable. For the trust deed to become a protected one, the creditors should agree to the terms and thus it is really essential that the debtors are able to get expert advice. We at DebtAdvisoryScotland have been offering our customers a successful proposal rate for many years and if you are in a substantial amount of debt that might seem really tough for you to repay, then taking the help of an insolvency practitioner in getting a trust deed will be the best option.
We know that it is really a vital decision for you and thus we do not intend to put any pressure on our customers. We offer the best debt solutions after going through your individual financial position as we know very well that one size doesn’t fit all.
It is really a very difficult task for a lot of people to take the necessary decisions in such conditions; but it must be mentioned that there are a few legislative changes that has been brought out. Previously the trust deeds were taken up by those people for whom it was not the right decision to make and also the fees regarding the trust deed process was unclear for them. Thus, it really affected both the debtors and creditors. The major consideration was for the creditors because in case of a Scottish trust deed failure, the creditors shall not receive any returns that are due to them. Therefore, it was important to make the legislative changes so that the debtors and creditors are treated fairly.
The key changes are as follows:
1. Debtors will receive much more protection: This is one of the major changes that have been taken as the time period of the trust deeds have been increased from 3 to 4 years. This is also a way of making sure that the trust deeds are solely offered to those who are in need of the debt solution.
2. More transparency concerning the insolvency practitioner fees: Before the agreement of the trust deeds between the debtors and creditors, they must be notified about the complete fees of an insolvency practitioner. Additionally, the trustees must charge the fees upfront instead of taking them hourly. This will reduce a lot of confusion and the overall trust fees will also be reduced.
3. The minimum debt threshold for attaining a Scottish trust deed has changed: Before the legislative changes, if the debt was £10,000 or more, then the individual was allowed a trust deed. But at present the minimum debt threshold has been reduced to an amount of £5,000. This has been helpful for those who have a considerable amount of debt but cannot apply for a trust deed.
Get in touch with the representatives at DebtAdvisoryScotland to know how a Scottish Trust Deed can benefit you in managing your debts.