New changes to Trust Deed law will allow debtors to exclude their home from their Trust Deeds, resulting in less homelessness and a fairer wealthier nation, says Trust Deed Company Scottish Trust Deed.
Changes to the Bankruptcy (Scotland) Act 1985 took effect on 15 November 2010, and were designed to widen the scope of debt relief for the Scottish population struggling in debt and reduce the heavy restrictions associate with Trust Deeds.
Trust Deeds are often a lifeline for debtors as it allows them to pay back a proportion of their debt over three year and then write off the remainder. However, previously if a debtor wanted their Trust Deed to become ‘protected’ so creditors could not continue to chase for money owed to them, all of their assets would be passed to an Insolvency Practitioner for the benefit of creditors, even assets which were of little interest or value.
This resulted in many families being forced from their homes into rented accommodation to release the equity in their main residence. This was a major reason for some debtors shying away from Trust Deeds, even though they were the only sensible financial option open to them at the time besides sequestration.
The amendment allows the exclusion of a debtor’s main residence from their Trust Deed as long as secured creditors have agreed not to claim for any debt under the Trust Deed.
A spokesperson for Scottish Trust Deed, said: “This is extremely welcome news and long overdue. No longer will debtors be forced from their homes for a very small gain for their creditors. The effects of homelessness are far-reaching and potentially very damaging. It can lead to unemployment, which can severely affect someone’s future employment prospects. It can cause physical and mental health problems in family members and children are more likely to struggle at school, significantly reducing their future prospects too.
“But its not just the families involved that are suffering. The average cost of providing temporary accommodation to a household made homeless was found to be around £5,300 a year in 2007, and these figures will have undoubtedly risen since then. This puts additional strain on the public purse at a time when cuts and cost efficiencies are being made.”
The Government estimates that the change in law will also reduce the administration costs charged by Insolvency Practitioners. There will be no fees related to consultation over what to do with the property, negotiating with the debtor, or costs of sale on the open market.
“The new changes to the law will provide reassurance for debtors and result in temporary accommodation savings, less burden on the tax payer, and contribute to the economic recovery and a wealthier and fairer Scotland,” concluded the spokesperson.
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Example Unsecured Debts
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a Scottish Trust Deed £748
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a Scottish Trust Deed £295
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