What is a Trust Deed?
A number of solutions exist for individuals with financial difficulties. None, however, offer the flexibility, affordability and protection from creditors, coupled with the freezing of ongoing interest, that a Protected Trust Deed provides. At Dissolve Debt our focus is on providing positive solutions to financial problems and Trust Deeds offer an ideal solution to many individuals with debt.
A Trust Deed is less formal and restrictive than sequestration, but is governed by the same legislation. It therefore provides the comfort that the process is being handled by experienced professionals, led by a licensed insolvency practitioner.
Who can sign a Trust Deed?
Any individual or partnership based in Scotland with personal or business debts can sign a Trust Deed.
The effects of signing a Trust Deed
By signing a Trust Deed you are transferring all of your assets (normal household items are excluded) to your Trustee. How this affects you will, of course, depend on your individual circumstances. Assets which are likely to be included in the Trust Deed are any equity in your home, cars, investments or any other significant assets.
The Trust Deed will be in force for an agreed period, generally three years, at the end of which the funds available will be paid to your creditors. Any remaining debt due to your creditors over and above the payment made will be written off. At this point, you will not be required to make any further payment in respect of debts incurred prior to signing the Trust Deed.
The only interest the Trustee is likely to take in your home is in respect of your share in any “equity” available. A valuation of the property will be carried out and the level of any outstanding mortgage or secured loans established. The difference between the value of the property and the outstanding debts secured on the property will therefore be calculated and arrangements made for this sum to be paid to your Trustee. This can be done by re-mortgaging, payment being made from a third party (often a family member) or additional payments being made at the end of the Trust Deed term. If necessary, we can arrange an introduction to an independent financial adviser who will provide you with advice on how best to deal with your equity in order to suit your circumstances.
Again, the Trustee’s interest will only be in any equity which exists in the car. If the car is subject to hire purchase, only the difference between the value of the car and the outstanding hire purchase will be required to be contributed to the Trust Deed. If your car is needed to travel to and from work, you will normally be allowed to retain the car and to continue to make payments to the hire purchase company.
How the Trustee deals with any other assets owned by a person signing a Trust Deed will depend on the value of the assets, their nature and whether they are required for any particular purpose. Again, our experienced professional staff will help to find the best way of dealing with any such assets.
Peace of mind
Before you sign a Trust Deed, Dissolve Debt staff will advise you on the various options that exist to deal with your assets and the effects signing a Trust Deed will have on your finances. An agreement will need to be reached as to how any value in your assets will be realised, and any agreed arrangements will be confirmed in writing.
Protection from creditors
Following the granting of a Trust Deed, the Trustee will place an advert in the Edinburgh Gazette. This is a Government publication subscribed to by solicitors, accountants, banks and various other institutions. It is not generally read by the public. Following the advertisement, the Trustee will then write to your creditors detailing your financial circumstances, explaining the process and setting out the likely payment that will be made. Creditors have five weeks from the date of the advertisement to object to the terms proposed by the Trustee. Provided that no more than one third in value or a majority in number of your creditors object to the terms proposed, the Trust Deed will become “Protected”, binding all creditors to its terms. Creditors can then no longer take court action for recovery of any debt incurred prior to the Trust Deed being signed.
How much will you have to pay?
The proposals made to creditors will usually include the potential realisations from any assets (as described above) and an agreed contribution from your future income. If you have no assets it is possible for a Trust Deed to proceed on the basis of a regular contribution only. The proposals made will be structured in order to best suit your personal circumstances. The purpose of the Trust Deed is to allow you to regulate your finances and achieve the best possible outcome for your creditors.
Fees and costs
An individual granting a Trust Deed will not be required to meet any fees directly. The agreed contribution and proposed asset realisations will fund the Trustee’s costs and will be deducted prior to any payment being made to creditors.
How long does a Trust Deed last?
A Trust Deed is usually based on a three year period. This is in line with the current period of a sequestration. However, in certain circumstances, this period can be shortened or extended in order to suit your own personal circumstances and to help achieve the best outcome for all concerned.