An Overview Of This Credit Relief Facility

With so many options available for debtors to save themselves, it is imperative for them to consult a debt management provider for assistance.  That said, trust deeds Scotland are quite straight forward, affording residents the option to avoid bankruptcy, as well as settle their debts in a short period of time (usually in less than three years). Below is an overview of this popular debt relief option, explaining what  exactly these deeds are, how to apply for them, and their pros and cons to individuals wallowing in unsecured debt.

Definition

In Scotland, a trust deed is a legal agreement that is created and protected by the 1985 bankruptcy Act. This agreement between a debtor and his/her creditors is administered by qualified insolvency practitioners. According to the office of Fair Trading, the agreement permits one to write off 90% of his unsecured debts up to a maximum of £6,500, while the remaining payments are spread out over a repayment period of 36 months. Once a deal is struck, creditors can no longer pester the debtor with calls or threats until the repayment period elapses. Thus, individuals are able to channel their efforts towards productive work, in order to raise the money required to settle their unsecured debts.

There are two forms of these deeds: voluntary and protected deeds. The former becomes active after both parties append their signatures on the document in the presence of an insolvency practitioner. The latter, on the other hand, is legally enforced to the creditor by authorities, no matter their sentiments on the issue.

Application Procedure

The application procedure for the deed is quite direct, with some providers even allowing customers to submit applications by telephone or online. However, for one’s application to be successful, one has to meet some basic conditions. These include:

  • Proof of insolvency.
  • The applicant must be a legal resident of Scotland.
  • The amount of unsecured debts must be more than £8,000.
  • One must have a regular income of £200 or more per month.

Typically, a debtor is required to furnish the insolvency practitioner with his personal financial details such as monthly income, expenses and other credit facilities used. This information is necessary to estimate the monthly payments towards the unsecured loan. Additional fees such as deed processing and trustee fees are also payable to the insolvency practitioner who facilitates the deal.

Once a title deed duly becomes active, it is published in the Edinburgh Gazette, and becomes legally enforceable after five weeks, so long as half of the creditors mentioned therein consent to it. Most creditors usually agree to these payment plans, because other options such as bankruptcy (sequestration) proceedings tend to be costly and time-consuming to undertake. The debtor must begin making payments immediately the deed is approved and published. After 36 successful repayments, the trust deed is wound up and any outstanding  unsecured debts are written off.

Benefits

  • With such a deed, one is able to avoid bankruptcy.
  • One is able to avoid constant pestering by creditors and credit collection agencies demanding for payments.
  • They usually eliminate interests, penalties and other loan fees, effectively reducing the overall balance, and preventing the debt from worsening over time.
  • They enable one to make loan repayments with ease, since a singular monthly repayment is made out to the insolvency practitioner, rather than multiple repayments to different creditors.
  • A trust deed allows one to budget their income more efficiently and avoid further debts. Court cases and bad credit scores are avoided altogether, leading to a healthier overall financial status.

Limitations

  • The deed appears on one’s credit rating for six years, making it difficult for one to secure further loans during this period.
  • It is impossible to secure a loan of more than £250, since the agreement requires one to notify prospective creditors about the existence of such as deed.
  • Failure to make the monthly payments stipulated by the trust deed Scotland can result in court cases that can effectively render one bankrupt.

For most people, debt is difficult to avoid and can accumulate quickly over time. When this happens, repayment becomes a challenge. At this point, one would be forced to weigh his options before creditors move to court seeking sequestration orders. Nevertheless, various debt relief options are available to Scottish residents knee-deep in unsecured debt, to assist them recover from their financial quandary. The above information offers a glimpse into trust deeds, which are among the debt relief options available for residents of Scotland.