A Scottish Trust Deed is an option used to provide debt help in Scotland under the Bankruptcy Scotland Act, 1985. Available only in Scotland to Scottish residents, this option can be offered to those who meet certain qualifying criteria, the major of which is that you have large amounts of unsecured debt that you are finding difficulty in repaying.
A Scottish Trust Deed is not a debt management program as such, but is more legally binding that that and more structured in the way your debt is repaid. You should make sure that you have considered all the options available to you before deciding on this form of debt help in Scotland, because it will have an impact on your credit rating and will generally be your last chance to repay your debt.
Let’s assume that have discussed your level of debt with debt counsellors and have decided that a Scottish Trust Deed is your best option. Perhaps you are already facing bankruptcy or repossession, or your debts have spiralled out of control and you can see no other way of getting out of the mess you are in. A trustee will be appointed to act a broker between you and your creditors, and will take the following basic steps:
- The trustee will investigate your income and essential expenditure, such as mortgage, other secured loans, council tax and other essential monthly bills. This makes sure that you can continue to maintain these payments, and then on top of that the trustee will deduct what is considered reasonable living expenses. What is left is the sum that you will be able to repay each month.
- The trustee will then investigate all your unsecured debts, such as unsecured loans, credit card debts and so on. A Scottish Trust Deed is a form of debt help in Scotland to help repay unsecured loans only, and you have to make sure that you continue to pay your mortgage, vehicle finance and other loans secured on property from the money left to you after deduction of the agreed deed payment.
- The amount of income you have left after all the above deductions is what you can repay, and will apportioned between your creditors on a pro-rata basis, so that each creditor receives the same percentage payment on the sum you still owe them. That could be 40p on each £1 owed, or 80p, but is unlikely to be 100%.
- The trustee will then draw up a draft proposal for you to amend or approve. You must make sure that you will be able to make the repayments you agree to because if you have difficulties later it might be too late for you. For example, if you have a fixed-term mortgage agreement that is due to expire over the next three years, or any other expected changes to your income or expenditure, then state so now.
- Once you have agreed to the draft proposal, your trustee will send it to each creditor who has 5 weeks in which to make any objections. Failure to respond is taken as an acceptance. As long as creditors owed no more than an accumulated 33% have objected, then the trust is taken as agreed.
- The Scottish Trust Deed is now legally binding on all parties, and your creditors can no longer legally contact you in any way and must stop all interest charges. You pay the agreed balance of your income into the trust fund from which the trustee pays each creditor, and also takes his or her fee as agreed with the creditors.
The usual repayment period is three years, and assuming that you maintain your payments as agreed, then your unsecured debts are regarded as paid in full at the end of that period even though you might not have actually paid the full amount owed. However, miss even one single payment and the agreement is annulled, and the creditors can take legal action to recover their money.
A Scottish Trust Deed is an option for debt help in Scotland only, and, as previously stated, is available only to Scottish residents who meet the criteria necessary for it to be applied. It covers only unsecured debt so will not necessarily clear all of your debts. Incidentally, if you have a car not needed for work then you may have to sell that as a condition and also cease payments or AVCs into any private pension schemes.
However, given all of that, it is a very good way for people who are burdened with unsecured debt they cannot repay to avoid bankruptcy and make a fresh start at the end of 3 years. Most creditors would rather agree to a Scottish Trust Deed than take their chances with a bankruptcy that could result in them receiving an even lower fraction of what they are owed. Make sure, however, that it is the most appropriate debt help in Scotland for you because it is generally your final chance at becoming debt free before bankruptcy proceedings commence.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here