Our series about Scottish trust deeds has hopefully helped you to understand a little more about these formal agreements, which can be very useful for certain people who need help with debt in Scotland. Having already considered aspects such as how they affect those who choose to use them, today we would like to drill down into the finer details: how they actually work, why their useful, and who can reap the biggest benefits from their use.
Understanding How a Trust Deed Operates
Generally speaking, trust deeds are there for people who are residents of Scotland with a debt of over £4000, owed to two or more creditors – and no reasonable way to pay it back in the foreseeable future. With a trust deed, you enter into a legally binding agreement in which a trustee is appointed to determine how much you can afford to pay back to your creditors, who then negotiates terms for a single monthly payment which you would make over a period of, generally, around 3-4 years.
Your Creditors Will have 5 Weeks to Approve or Reject these Terms
Once your trustee lays out a proposal for a monthly repayment amount, the creditors have 5 weeks to make their decision as to whether or not they’ll accept it. If they do not reach a decision in that time, or if fewer than half of them reject the proposal, you can proceed as though it has been accepted.
Then it is a relatively simple case of paying the agreed amount every month; at the end of the payment period the debt is cleared regardless of the total amount repaid.
Giving Up Your Assets
If you have any assets which are deemed unnecessary – such as a car which you don’t need for work or a valuable collection – then you will be expected to sell these to add to the total amount which you are able to repay. It can also sometimes involve, for instance, remortgaging your house, but this is not necessarily a requirement and is best discussed on a case by case basis.
Who it Helps
A trust deed isn’t the only option for getting back on track with your debts, and for people who do not want to re-mortgage or sell their home, or who are worried about the impact that it will have on their credit rating, it is always worth talking to a professional about other possibilities.
However, for many people this is the best way to regain control over your finances and move forwards into a debt-free future. It can also put an end to the snowball effect of a debt which continues to grow due to interest, becoming overwhelming. As a practical option for getting on your feet and taking concrete action, it certainly aids peace of mind!
The most important thing is not to rush into any decisions; once you have decided to work on reducing your debt, you need to take some time to weigh up all of the choices that are available to you. Speaking with a trained professional is certainly the best way to ensure that you find a solution tailored to your own needs, so if you would like to speak with a member of our team then please don’t hesitate to get in touch with us, online or at 0800 011 2322. It’s never a bad time to get your finances back on track.