What is a trust deed?
A trust deed is a consensual arrangement for both you and your creditors, or persons to whom you owe money. You commit to pay a certain amount to your obligations on a regular basis, with the remainder of your debts being wiped off at the completion of a set period of time.
All of your possessions and property (your liabilities) are given to someone who will manage your finances. They are referred to as your trustee. The trustee's goal is to repay your debtors as much of the amount as feasible.
This may include the sale of some of your possessions or property in order to repay your creditors with the proceeds.
If the plurality of creditors agrees with the conditions of the trust deed, it might become 'protected.' This implies that all creditors are bound by the trust agreement and cannot take further action to reclaim the money owing to them.
If a credit agreement is not 'secured,' it will not obligate every one of your collectors, and they may still pursue you for the money you owe them.
When you should consider using a trust deed.
If you have the following, a trust deed may be an alternative for you:
- debts - you owe £5,000 or more in debt.
- adequate revenue to make monthly installments - you have enough funds to contribute to your obligations on a regular basis. If your primary source of income is benefits, you won't be able to put up a trust deed.
- You have personal possessions and property (resources) such as savings, assets, a vehicle, or a home. These can be sold, and the proceeds used to repay creditors.
The benefits of secured trust deeds
Secured trust deeds provide the following advantages:
- No interaction with individuals you owe money to - those you owe money to (creditors) are no longer able to get in touch with you and must instead negotiate with your supervisor.
- No further enforcement action - If you're considering setting up a reliable deed, you can appeal to the Auditor in Bankruptcy to prohibit your creditors from pursuing you for the amount you owe him. It's known as a moratorium which lasts for 6 months. This means that your creditors would no longer be able to act against you, such as freezing your bank account.
- Capacity to pay bills - You are not needed to demonstrate that you are incapable to pay your debts when they become due. This is referred to as 'apparent insolvency.' To qualify for bankruptcy (also known as sequestration in Scotland), you must be able to demonstrate this.
- Work and public office - You are not excluded from certain sorts of career or government positions, as you'll be subjected to sequestration.
- Seeking funding - Even though it may be challenging to get in practice, you are not legally prohibited from taking loans (obtaining credit) such as a mortgage or a credit card.
- Debts forgiven - your trust deed will normally expire after four years (called clearance). The majority of your loans will be forgiven, and you'll never be required to repay them.
Other things to think about when it comes to trust deeds
You'll normally need enough money left over after paying for necessities (referred to as discretionary income) to make a payment on your indebtedness.
If your primary source of income is perks, you won't be able to put up a trust deed. If you have other sources of income in addition to benefits, any payment you submit to your arrears cannot include revenue from your perks.