Trust Deeds- Scottish Individual Voluntary Arrangement (IVA) Equivalents
Residents of England and Wales have the Individual Voluntary Arrangement (IVA) debt solution and Scottish residents have Trust Deeds. By using this debt management tool, residents of Scotland can get themselves back on track financially in as little as 36 months.
If you reside in Scotland, learn more about this debt solution and how our company can help you utilize it. Experts agree that the sooner you eliminate debt, the better.
Scottish Trust deeds are only available to residents in Scotland. They are a fantastic debt solution if you qualify and your creditors approve. You are maybe able to consolidate all your debts into one single affordable repayment over 4 years. A Trust Deed or a ‘Protected Trust Deed’ is a formal debt management plans for Scottish people who are really struggling with unsecured debts. A Scottish Trust Deed uses government approved legislation to write off up to 90% of debts and reduce monthly repayments as well as freeze all interest and charges.
It is only available to Scottish residents, so if you live in England or Wales or Northern Ireland an Individual Voluntary Arrangement (IVA) or Debt Management Plan (DMP) might be the right solution for you. Trust Deeds are a formal agreement between you and a licensed Insolvency Practitioner (IP) who acts as a Trustee.
When you apply for a Protected Trust Deed a full financial assessment of your income and essential living expenses will be carried out to calculate what you can reasonably afford to pay each month.
You will pay monthly instalments for a minimum of 4 years, and the remaining debt after this time will be written off. Whilst in a Scottish Protected Trust Deed, all interest and late charges will be frozen and your creditors can no longer legally contact you or take legal action against you – as long as you adhere to the terms of your Trust Deed.
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Basic Information About Scottish Trust Deeds
A Trust Deed is considered a formal agreement that is made between Scottish debtors and their creditors for unsecured debts. To qualify, an individual must be a resident of Scotland, have a regular source of income, and have £10,000 worth of debt from at least two creditors.
With the help of a third party, the debtor arranges to repay an affordable amount to each creditor. This debt management tool is designed for Scottish residents who are able to repay debts but are having difficulty affording associated monthly payments, though they have assets or income to do so. There is no minimum or maximum amount of debt required to qualify for a Trust Deed.
An insolvency practitioner is assigned to manage the arrangement and becomes the trustee. The agreement transfers rights to items that are owned, including the home, to the trustee, who may sell these as necessary to cover debts and management expenses.
A typical Trust Deed lasts for 36 months, during which the debtor pays a set monthly amount. A portion of this money is provided to the trustee as compensation for managing the arrangement.
There typically is no cost to establish this legal agreement but there are some exceptions, so consumers should request a detailed cost list before agreeing to work with a Trustee. It takes approximately two to four weeks to draft most agreements. The documents must then be approved by creditors representing 75 percent of the debt, which could take an additional two weeks. Once a Trust Deed is in place, creditors may agree to freeze interest and other charges.
For the arrangement to become protected, it must be agreed to by a majority of creditors or those representing at least one third in value within a five-week period. Lack of reply by a creditor signifies agreement for this purpose. If the Trust Deed becomes protected, covered creditors are also not permitted to take legal action while the agreement is in place.
The amount of debt repaid is determined by the debtor and the trustee based on current income and expenses. The debtor submits each monthly payment to the trustee, who divides the money amongst creditors as agreed. When the covered period ends, creditors must write off any debts that remain, leaving the individual debt-free.
Our experienced representatives are able to review the financial situation of a Scottish resident, determine whether this is a suitable debt management solution, help the individual calculate a monthly repayment, and draft the relevant documents, all at no charge.
Assets Not Covered, Asset Changes, And Return Of Assets
When a Trust Deed concludes, some debts will remain and must be repaid. These include student loans and money owed to an individual who holds security on property of the debtor, such as through a secured loan or mortgage. An aliment obligation, fraud-related liability including benefit overpayments, and court-imposed penalties, compensation, fines, and forfeiture orders also will not be discharged.
If the financial circumstances of the debtor change, the payment under the arrangement may be altered. For example, if the income of the debtor increases, the individual could be asked to make a higher monthly payment. Payments may be reduced or suspended if income decreases.
If new assets such as lottery winnings or inheritance are acquired, the trustee must be informed and control of the assets must pass to this individual. If a home is excluded from the arrangement and is subsequently disposed of or sold, money remaining after meeting the cost of sale and repaying secured loans must be turned over to the trustee. If the home increases in value, the monthly repayment amount may be increased.
Once the trustee determines that the debtor has met the financial obligations under the arrangement, a letter of discharge is issued. Any money or assets remaining after the payment of all agreed-upon debts, expenses, and fees are returned to the covered individual. The credit file of the individual will reflect that the arrangement has been satisfied and the credit rating will begin to improve.
Consequences Of Using Trust Deeds
If the home is owned fully or jointly, ownership rights are transferred to the Trustee. This means that the property could be lost in order to repay a portion of the debts or cover the cost of managing the arrangement. During the covered period, the debtor is not permitted to obtain additional credit.
Credit rating is also affected by this debt solution, which can make it difficult for the covered individual to qualify for credit in the future. A creditor that does not agree to the arrangement can prevent it from becoming protected. This leaves the door open for creditors to take action against the debtor.
Creditors are not bound by a trust deed unless they agree to its terms, making it protected. During the five-week reply window, creditors who object to the arrangement may apply to the court to make the debtor bankrupt. An individual covered by a protected Trust Deed may not apply for a Debt Arrangement Scheme or bankruptcy.
Secured creditors are permitted to repossess the home if the debtor falls behind on mortgage payments. If the arrangement is not protected, creditors may be able to bankrupt the debtor. New debts incurred following the establishment of a Trust Deed are not protected under the existing arrangement.
Trustees charge approximately £2,500 to £5,000 for their services and are paid before creditors. Once the arrangement is signed, it will be publicized in the Edinburgh Gazette for credit reference agencies and banks. The Trustee will also forward a copy to the Accountant in Bankruptcy, who will record a protected arrangement on the Register of Insolvencies. As a public record, this register is accessible by anyone.
Individuals in certain careers may be prohibited from using this debt management solution. For example, the articles of a limited company typically prevent a director from entering a Trust Deed. Some public bodies have regulations in place that prevent someone from serving in office while this arrangement is in place.
Financial institutions and some other companies may choose not to employ individuals with a Trust Deed. Before entering this debt management arrangement, Scottish residents should review the terms of their employment contract.
Getting Advice Regarding Trust Deeds
Several resources are available to residents of Scotland seeking advice about a Trust Deed. Money Advice Scotland, Citizens Advice Scotland, and money advisers with a local authority are a few free resources. An insolvency practitioner or solicitor can also provide advice but some of these professionals charge for their services.
Debt management experts with our company offer their services at no charge. Since entering this debt management arrangement is a serious matter, Scottish residents should make use of one of these professional resources.
In certain situations and with the agreement of creditors, an arrangement that excludes the home may become protected. This makes it even more important to find a knowledgeable company to establish and administer this debt solution. Inexperienced debt consultants may not be aware of nuances like this. In addition, they may not have the knowledge to accurately calculate the value of assets. A knowledgeable trustee can provide options other than the sale of the home on the open market.
Positive Aspects Of Trust Deeds
With a Trust Deed, Scottish residents are able to prevent unsecured creditors from hassling them regarding debt repayments. Within three years, up to 90 percent of debt may be written off, allowing the individual to start over with a financially clean slate.
Only disposable income is used to repay covered creditors, allowing individuals to cover living expenses without financial duress. Some debtors are even able to negotiate to keep their home. Sole traders and company owners may continue trading and may even be able to obtain a small amount of credit.
Debtors may be able to negotiate repayments that represent only a portion of total debt. As long as the covered individual makes monthly payments as agreed, the debt will be considered paid in full at the end of the repayment period. In extreme cases, the timeframe of the arrangement may be extended or a payment holiday may be negotiated. By keeping the trustee informed, the covered individual can avoid missing any payments.
Scottish Trust Deeds may not be the answer for all Scottish residents in debt but many individuals have benefitted greatly from them. Under this arrangement, an individual becomes debt-free relatively quickly and often without lasting financial consequences. Once the arrangement has been satisfied, the person will begin with a clean slate, making it possible to have a future without debt.