Scottish Trust Deed - Also Known As A Scottish IVA
A Scottish protected trust deed is only available to residents of Scotland. It is available to people who are currently employed and have over ten thousand pounds of unsecured debt. It is similar in nature to the Individual Voluntary Arrangement (IVA).
Per the Scottish Protected Trust Deed, borrowers can write off up to 90 percent of their unsecured debt. The arrangement is put into place for a specified amount of time dependent on the current circumstances, level of debt, and income and expenditure of an individual. Monthly payments are based on an affordable amount that is worked out as part of the arrangement of the plan, and creditors will receive the funds accumulated at the end of the plan. Any remaining debt after the funds have been received by the creditors will be written off. Monthly payments are handled by the Trustee, also known as the Insolvency Practitioner, who handles the sale of any significant assets and will distribute any monies collected to the creditors. Payments are made over a three year period, after which time the debtor will be virtually debt free. During this period any secured loans, mortgages, and hire purchase commitments will continue to be paid.
To enter into a Scottish Protected Trust Deed, the first step that must be taken is to compose a list of creditors, show how much is owed to each as well as a total amount owed, and propose an affordable payment plan. A normal Trust Deed will then have to placed in the Government Publication known as the Edinburgh Gazette. This is not a publication that is available to the general public, only to Solicitors and larger institutions.
The trustee will then prepare a proposal that will be sent to the creditors for approval. A Protected Trust Deed can then be administered and registered. The Protection Trust Deed will be granted provided that at least two thirds of a person’s creditors approve the plan. Interest will then be frozen on these debts and creditors will not be able to take any legal action against the debtor. Creditors will have a right to any equity that may exist in regards to an individuals home. Payments to the trustee will not need to be made up front. Instead, they will be paid from the plan.
Once entering into a Protected Trust Deed, there will be certain things that will be expected from the debtor or debtors.
- Co-operation with the Trustee
- Payment of the agreed upon monthly contribution
- No undertaking of any further debt
- The Trustee must be advised of any changes in financial situation including any windfall that may take place while within the term of the arrangement
People can enter into a Protected Trust Deed arrangement for various reasons, such as divorce or medical problems. The benefits that can be achieved by entering into a Protected Trust Deed include not having to deal with harassing calls from or correspond with creditors, affordable payments, frozen interest and penalty charges, and a debt free future. While a Scottish Protective Trust Deed may be similar to an IVA, it should not be confused as the same.
What Are The Benefits Of A Trust Deed?
- Debt free in 36 months.
- All Interest and charges on your debts are frozen.
- The Monthly payment are based on what you can actually afford.
- No direct fees to be paid by you but be warned some companies may charge you an upfront fee.
- No more creditor contact for the duratiion of the Trust Deed.
- Avoid bankruptcy.
- Legal action and collection action will stop.
- Compels you to address your financial management issues.
- Removal of the temptation to get further into debt.
How Does A Trust Deed Work?
First you will need to contact an Insolvency Practitioner in Scotland. You will need to provide the IP with information on your current debts, your income, and your expenditure. From there, the Insolvency Practitioner can calculate how much you can realistically afford to pay back each month to your unsecured creditors.
Once you’ve both reached an amount, the IP will begin contacting your creditors to reach an agreement on the debt repayments. Unless there are objections from more than half of your creditors (or from any creditors who ‘own’ more than a third of your unsecured debt), then your Trust Deed will become protected by law.
Once agreed, your Trust Deed cannot be cancelled, and as long as you keep up with the monthly repayment you’ll be debt free in 36 months time.
Will A Trust Deed Affect My Credit Rating?
A Trust Deed will severely affect your ability to get credit over the period of the agreement which in most cases is a minimum of 3 years. During this period, you will not be able to get credit of any kind. Whilst this may cause concern, after the Trust Deed has run its course you will be in a better position to improve your credit rating over the following 12 months, and will have a better handle on living within your means and managing finance better.