Editors note: This article is for all our UK readers.
A legally binding arrangement, a protected trust deed allows you to make lowered payments over a period of four years. At the end of the four years, your unsecured debts are usually written off. A protected trust deed is a good option for anyone living in Scotland who is struggling with their debt.
Trust Deed Briefly Explained
A form of insolvency, a trust deed is an agreement that lasts four years, after which the lender must write off any remaining debt, including your unsecured debts. Unsecured debts include store cards, personal loans, and credit card debts. Trust deeds are available to only people living in Scotland.
For residents of England, a similar solution available to them is an Individual voluntary arrangement (IVA). However, the benefits, risks, and fees of an IVA are different from that of a protected trust deed. So, if you live in Scotland, why should you go for a protected trust deed? We discuss that next.
The Advantages of a Protected Trust Deed
Arranged by an Insolvency Practitioner (IP), a protected trust deed involves making repayments to your creditors for four years. At the end of this period, any debt that remains is written off. This is just one advantage of pursuing a protected trust deed. There are several other benefits of entering into a protected trust deed, including:
No Direct Contact from Lenders
Once you enter into a protected trust deed arrangement, your creditors will no longer contact you directly. Instead, the Insolvency practitioner (IP) will handle the correspondence with your creditors on your behalf. No more phone calls, reminders letters, or home visit from creditors!
Prevent Creditors from Taking Any Enforcement Steps Against You
At some point, The IP or advisor you choose will recommend a ‘moratorium’ to you. A delay or suspension of a legal activity lasting six weeks, moratorium prevents your creditors from taking any enforcement steps against you, such as freezing your bank account. Generally, your IP or advisor will ask you to apply the ‘moratorium’ at the very beginning of the process.
No Need to Prove Your Inability to Pay Bills
A protected trust deed relieves you from having to prove your inability to pay bills, like you need to do in the case of bankruptcy. This is due to ‘apparent insolvency’ and you can get more information about it from your IP or advisor.
You’re Not Legally Prevented from Obtaining Credit
While it might get difficult for you to obtain credit while you make repayments, a trust deed does not legally prevent you from obtaining it. In fact, if you’re lucky enough, you may come across one of the creditors who think that trust deeds add credibility to your debt management and who may offer you some credit options. However, the interest rate is likely to be significantly higher than the standard.
The above list is not exhaustive and there are many other reasons to partner up with an insolvency practitioner (IP) to enter into a protected trust deed arrangement. As mentioned previously, for people in England, an IVA is a similar solution. To know more about protected trust deed or IVA, get in touch with us today.
US Readers: Consider Filing Bankruptcy
If you’re reading this article and you’re in the United States a IVA or contacting an insolvency practitioner is probably off the table. Instead you might consider filing bankruptcy. Before you start down this road, you should be aware that it is pretty much like dropping an atomic bomb in your finances. You’ll need years to recover and your borrowing costs will be a lot higher moving forward. The best sources of information for those considering it are from the US courts, and from Debt.org.
