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What is a trust deed?

What is a trust deed?

What is a trust deed?

A trust deed can be a great solution for dealing with unmanageable debts. A formal agreement between you and your creditors, it helps you control your finances through regular repayments over a fixed period.

A trust deed is exclusive to Scotland

Trust deeds are only available in Scotland. However, if you live in England, Wales, or Northern Ireland, an IVA (individual voluntary arrangement) is similar. It’s worth noting that – although they share a lot of qualities – a trust deed does differ from an IVA.

How does a trust deed work?

Trust deeds are managed by specialist individuals known as insolvency practitioners. During the application process, these professionals work with you to organise such aspects as a repayment plan and determine the length of the trust deed itself.

Usually, this person will then become a ‘trustee’. The trustee has approval to act on your behalf regarding your financial affairs. He or she will, in turn, notify your creditors and attempt to gain their approval for the trust deed to become ‘protected’.

The differences between an unprotected and protected trust deed

Where possible, a trustee will strive to grant a trust deed ‘protected’ status. In this situation, the agreement is binding on all parties and creditors cannot take steps – such as sending bailiffs or looking to make you bankrupt – to recover funds.

When the trustee seeks approval from creditors, at least 50% must agree to the terms for the trust deed to become protected. Should this not occur, the agreement instead becomes unprotected. As a result, the trust deed has no legal standing.

However, this situation is quite unlikely to occur. Providing the terms of the trust deed are reasonable and offer clear benefits to your creditors, it will usually gain protected status.

A Trust Deed helps you control your finances through regular repayments over a fixed period

Do I qualify for a trust deed?

Although the qualifying criteria for a trust deed varies between insolvency practitioners, you should qualify providing:

  • The total value of your debts exceeds £5,000.
  • You have a reliable source of income to make regular contributions towards your debts.
  • You have sufficient assets - such as a house, savings, or car - which could be sold to raise money for your creditors.

Benefits of a trust deed

Similar to other financial solutions, a trust deed has a variety of pros and cons. For example, it has the following benefits:

  • Creditors can no longer contact you regarding your finances. Instead, all communications have to go through the trustee.
  • Once the trust deed has been completed, typically after around four years, any remaining debts will usually be written off.
  • Your debts are repaid through manageable monthly payments.

Apply for a trust deed here

If you live in Scotland, and want to regain control of your finances, a trust deed could be the best solution for you. To find out more information about this solution, get in touch with our team of friendly advisors today. You can do so through either the contact form or by calling 0161 956 2688.

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