Protected trust deed. Is it right for you?
Trust deed is an arrangement that is legally binding in Scotland where you are making reduced payments over 4 years. At the end of this time, your unsecured debts are will get written off.
A trust deed is a form of insolvency so that your unsecured debts need to greater the value of your assets such houses or vehicles. Unsecured debts include a credit card debt, personal loans and store cards.
If you live in Scotland trust deeds will be available. If you live in England, Wales or Northern Ireland, an Individual voluntary arrangement (IVA) is a similar solution to trust deeds, but it is important to note that it has different fees, benefits and risks associated with it.
1 What is a Protected Trust Deed PTD?
A protected Trust Deed is a method of reducing your payments of debts for four years from the beginning of the deed. However, this deed is only available if you are Scottish. This deed is available in form of Individual Voluntary Agreement IVA for citizens of England, Wales, and Northern Ireland. You can get detailed information regarding IVA from our experts as well.
The Protected Trust Deed is a form of Scottish agreement that allows you to pay your debts at a reduced amount without worrying about any further actions taken by your creditors in terms of your payments.
The deed is carried out with two thirds of your creditors agreeing to the deed. Your insolvency expert will guide yours against your income and expenditure. We at FreeDebtHelpline expertise in providing effective insight regarding your finances, providing you with an effective plan for your payments in the deed.
The Accountant in Bankruptcy accepts your application from your insolvency specialist as well as appoints him as your trustee for the process.
1.1 Things to ponder on before choosing PTD:
A protected trust deed is a bond between you and your creditors that is based on your affordability of the debt payments in accordance with your income streams. The deed is based on your consideration for choosing your assets for remortgaging that will allow you to repay your debts.
Your money specialist will act as your trustee and will take into consideration your income streams for formulizing your debt repayment plan. In addition, your trustee will be communicating with your creditors on your behalf.
While considering a PTD, you must ensure that your money specialist is aware of your actions prior to the approval of the deed. Actions and decisions taken prior to the deed will not be amended after the approval of the deed.
In addition to the approval to the protect trust deed, your creditors can still file for other debt managing processes such as sequestration if that ensures more financial feasibility for them.
In case of managing your debt payments, you can contact our experts at FreeDebtHelpline that will advise you on your requirements regarding debt management as well as effective advice on opting for the best debt solutions.
2 Why choose Protected Trust Deed:
There are multiple advantages and disadvantages to choosing PTD that you should be aware of before opting in:
|Benefits of PTD||Drawbacks of PTD|
|• Monthly debt repayments are reduced for four years, helping you to manage your payments effectively.||• Your insolvency expert will usually take his cut for the service of acting as your trustee. It is better to negotiate the percentage prior to the approval of the deed.|
|• You are safe from further legal actions by your creditors regarding the increased interest rates, more payments etc.||• In case you are singing a trust deed, your job or business is more likely to be affected by the deed.|
|• In order to make the payments, your trustee will liquidate your assets such as house, vehicles etc. However, you are allowed to keep vehicles worth £1000.||• Failing of the deed will result in complete bankruptcy. Ensure that you are satisfied with your agreement details.|
|• Although PTD is a formal debt activity, you are not obliged to appear in court for the approval of the court.||• In terms of the repute, this will be mentioned in the public insolvency register, which will affect your credit rating for the next six years.|
|• Your unsecured debts are written off after the end of the deed||•|
3 Important factors to be considered for PTD:
The foremost action to be taken before considering a protected trust deed is to consult an insolvency specialist. We at FreeDebtHelpline offer valuable advice in terms of your financial management for choosing a debt management plan.
- Before opting for PTD, you must ensure that you have arranged the necessary resources for the agreement, as this is an obligatory agreement between you and your creditors.
- A protected trust deed is an effected method to secure yourself from further legal actions from your creditors. However, for the deed to protect you from any legal actions, it is necessary that you comply with the terms of the deed. Otherwise, the deed will fail and it can result in adverse circumstances including bankruptcy.
- Ensure that you have conveyed your decision to your employer to avoid any disagreements. Having to explain your actions later can create misunderstandings and lead to job dismissals.
- Make sure that your landlord knows about your deed as in some cases, your landlord may terminate your tenancy agreement.
- In terms of owning a home, you will be required to release equity for managing your payments. Your trustee will also contact you regarding this matter for managing your finances.
- In addition to your financial information, you must inform your trustee of any situational changes occurring during the deed including job dismissal, inheritance etc. This will allow your trustee to amend any policies in the agreement to manage your payments.
- In terms of the payments to be made, the debts included in your trust deed will be written off only if you fulfill the requirements of the deed. Moreover, you will be required to pay a fee of your trustee as well.
4 How will the deed affect you?
Before opting for the protected trust deed, you need to be aware of the effects of the deed on your financials as well as a livelihood:
Since the payments are to be made for four years, you need to submit your surplus income to pay the maximum debts before the deed protection. The surplus income will be available after you have calculated your income streams and expenses.
With the initialization of the protected deed, you will need to have the consolidated budget for the rest of the payments to ensure that the deed stays intact. This also means that you need to manage your income streams more efficiently to avoid further debts.
In addition to the payments, your trusted deed will be added to the Insolvency Register, which will be made public. This can affect your repute and can result in job dismissals.
Your advisor of insolvency will charge for the service of becoming your trustee, which will be deducted from the payments made for the deed fund. Thus, you are required to manage your financials in the manner that will allow you to supply effective amounts covering both charges.
Incompliance with the requirement and conditions of the deed will cause the deed to fail, which will allow your creditors to pressurize you further with legal activities including forced bankruptcy.
5 Alternative debt solutions:
Additionally, multiple debt managing options can be chosen to pay off your debts. Our experts at FreeDebtHelpline help regarding your finances as well as provide you with effective debt management advice.
6 Trust deeds at a glance:
|You can make an affordable repayment to your creditors over 4 years with a help of an Insolvency Practitioner (IP). After that, any remaining debt will be written off.||A IP take a charge for their service out of your monthly repayment so it is important to shop around and find which is the best one for you.|
|Your creditors will not chase you for payment or add more interest and charges to your debts once your trust deed has been approved and they cannot take legal action.||A trust deed will affect the terms of your employment and you should check your contract or speak to your HR department about this.|
|You will be able to keep one vehicle that is essential and that costs £3,000 or less while you have to sell some assets.||If the trust deed fails there is a risky chance of bankruptcy.|
|You don't have to go to court even though a protected trust deed is a formal debt solution||Your credit rating gets affected for six years, start from the date and then arrangement is agreed.|
7 Things you must take into consideration:
There are a number of things to take into consideration before deciding to enter into the trust deed. These are the following points:
- A trust deed is an agreement that is legally binding between your creditors and yourself.
- Provide that you comply with the terms and conditions of your protected trust deed, your creditors are not allowed take further action to recover the money you owe them or to make you go into bankruptcy.
- You will have to check if it has affected your job. A trust deed is a form of insolvency and having one could lead to disciplinary action or dismissal in certain jobs, such as those working in financial services or in a legal profession.
- If you are granted a trust deed and you have rented out your property to your landlord, they will terminate your tenancy agreement.
- If you are a homeowner you might have to release equity from your property
- You will have to pay any surplus income that you have after your essential living costs are getting paid into your trust deed for the past four years.
- You will have to inform a trustee regarding your personal or financial situation changes. i.e. if you inherit some money or that you have lost your job
- Only the debts included in your trust deed will get written off at the end of it. there's a risky chance of bankruptcy if the trust deeds fail.
- You will have to pay a fee for the services of the insolvency practitioner running to the trust deed. This fee is deducted from your payments.
8 How can trust deed affect me?
Before getting into trust deed you should decide very carefully due to the possible consequences for your personal, professional and financial life. These include the following:
- You will have to keep to a budget for the full term of your trust deed for 4 years.
- A trust deed can also affect any hire purchase agreements you might have in an addition to your employment.
- Your details will be added on a public register called the Register of Insolvencies (ROI) for a period of five years. The register that contains all details of current protected trust deeds and is maintained by the Accountant in Bankruptcy (AiB) however the general public are allowed to view,
- During your trust deed, there will be restrictions on your spending. You will have to follow very carefully to a budget to make sure that you can afford the monthly payments.
- There will be charge for the services of an insolvency practitioner but the fees will get deducted from the trust deed fund. This is the total amount of money you will be able to offer your creditors and is made up of your monthly payment on the agreed term and any assets or equity are included.
Who could oversee my protected trust deed?
Without an IP (they're known as your 'trustee') you cannot start off a trust deed. The IP offers a proposal and will also be able to help and support you throughout the arrangement.
Alternative debt solutions
While a trust deed is the correct solution to your financial situation, there are other options that you might want to consider and take a look at:
A debt payment programme (DPP) under the Debt Arrangement Scheme (DAS).
Trust deeds Advice
Trust deeds are a specialised area of Scottish debt advice. If you have not already received advice from us, make sure it is the best solution for yourself. We will provide you the best solution to help you deal with your debts also with a tailored budget.
If you prefer to talk to us, please call our Helpline on 0203 883 8698 and you can speak to one of our expert Scottish debt advisors.
If a trust deed is the best solution for you, we will help you find an IP and give you details of the best firms available.
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