How do I apply for a Scottish Trust Deed?
A Scottish Trust Deed is a formal agreement that enables you to cease any existing payments for your unsecured debts, such as credit cards, and loans that you are struggling to afford, replacing them with a single monthly payment. This is based on what you can actually afford, and paid over a fixed term – usually 4 years. Once a Scottish Trust Deed is completed, all of your qualifying unsecured debts are written off and you are debt free!
These Deeds are similar to an Individual Voluntary Agreement (IVA) in England and Wales; both have the same objective, and have to be agreed by the debtor and the creditor.
The big advantage of a Trust Deed is that a registered Insolvency Accountant, often referred to as a ‘trustee’ will deal with all of your creditors, ensuring that the payments due to them, are distributed accurately. You can just get on with your life, secure in the knowledge that it is all being taken care of in a hassle-free way.
However, a Scottish Trust Deed is not suitable for every situation.
Do I qualify for a Scottish Trust Deed?
In order to qualify for a Scottish Trust Deed you must be a resident of Scotland for at least six months prior to your application, and have unsecured debts of more than £8,000, such as bank loans and overdrafts, store and credit cards, credit union and payday loans. Mortgages, secured loans or hire purchase debt cannot be included as the debt is secured against the asset.
How do I start the process?
One of our experienced and friendly Trust Deed wizards will go through the whole process with you, making sure you are comfortable with every step before proceeding to the next one. We aim to make the whole thing easy, understandable and hassle free.
We will calculate your affordable repayments. Using an evaluation based around your income to debt ratio, such as mortgage, council tax, utility bills, and so on. Whatever is left from your earnings will be divided in equal amounts to pay towards your debts. If you are happy with this figure, we ask you to sign the forms agreeing to your repayment plan – this locks you into a financial agreement.
Once we have your signature, we can move forward with your Scottish Trust Deed application.
What happens next?
Your details will be entered into the Register of Insolvencies. This is a publicly accessible register that lists every individual or business in Scotland that is insolvent. Your trustee, or Insolvency Accountant provides all of your unsecured creditors with copies of your Trust Deed, Register of Insolvencies entry, a claim form, and a detailed statement of affairs. The latter includes information regarding your financial position, assets, payments, and the likely distribution of prospects.
From the date your details were entered into the Register of Insolvencies, your creditors have five weeks to object to the Trust Deed proposal. After that, it becomes protected. A non-response is seen as an agreement.
By the end of those five weeks, if less than half your creditors or one third in value of your creditors have objected, your trustee needs to contact the Accountant in Bankruptcy before another four weeks has passed.
However, there are a few assets that you may have to sacrifice along the way. If you own a vehicle, or a bike, that is not necessary for work, you may have to sell it to add its value into your Trust Deed; likewise any expensive collections, jewellery, or other luxury assets.
If you own your own home and you need to apply for a Trust Deed, you may have to sell it in order to raise money to pay towards your debts. In some cases, if you have little or no equity in your property, you may be able to set up a type of Protected Trust Deed which does not include your home. The equity is the money left after selling your house, and paying off the mortgage. You can only exclude one home from your protected trust deed and it must be the only or the main place that you live.
If your Trust Deed does include your home, you have family living with you and your trustee does want to sell the home, you can apply to the sheriff court to ask for the sale to be refused or delayed for up to 3 years
Our experienced Trust Deed wizards can hep and advise you with what to do regarding your house.
Once the Accountant in Bankruptcy is satisfied that the disclosure is all correct and above board, that the procedure has been duly followed, and that enough creditors have acceded to the Deed of Trust, it is recorded in the Register of Insolvencies – it is now classed as ‘protected’. This means that it is fully binding on all parties as long as your obligations are met. No creditors can pursue you, and as long as your repayments are kept up, you can carry on with your life, secure in the knowledge that your debts are dwindling.
Typically you make your first payment within the first four weeks, before your Trust Deed becomes protected. This can be set up between you and your trustee for a time of month that works for you.
For example, if you are paid salary at the end of each month, your trustee could arrange your Trust Deed payments to be scheduled for just after that hits the bank.
Once your Scottish Trust Deed is satisfied as complete, after 48 months, you are discharged!
It is crucial to note that, once signed a Trust Deed is a legally binding contract which you cannot cancel. It is extremely important that you fully understand all the terms and conditions of your Trust Deed before entering into it.
How long does an application take?
An Insolvency Practitioner can take up to 8 weeks to draft a Trust Deed proposal, but this varies depending on the complexity of the case. The creditors can then take a further 2 to 3 weeks to approve the proposal.
How much does it cost to apply for a Scottish Trust Deed?
Your licensed Insolvency Practitioner, or your trustee, will charge you a fee for setting up and managing the Trust Deed for you. By law, they cannot charge by the hour for this, but have to charge a single, fixed, up-front amount, plus a percentage of any assets they collect in as part of their Trust Deed management.
These fees can vary and work out expensive, so do shop around and compare prices, services and amenability of the trustee.
Can I change my trustee?
You will be working very closely with your trustee, declaring your finances openly, and things can get a little emotional, so they must be someone you feel comfortable with. They will be the person who decides if you have met your obligations, and whether you will be discharged from your debts, so it is crucial that you talk to them, in the first instance, if you are not happy with them.
All trustees are members of an approved governing body. Your trustee will give you details of their governing body and you can contact them if you are unhappy with the way your trustee has dealt with your Trust Deed.
How long does a Scottish Trust Deed last for?
How long you are tied in for can vary depending on circumstances. If you can repay your creditors ahead of schedule or you have a property to sell, it may be discharged early, but typically a Trust of Deed lasts for 4 years.
If you are still struggling to meet your obligations, however, or if you arrange to make extra payments in place of releasing property equity, it can be possible to arrange a longer repayment plan.
Can I get credit once my Trust Deed is satisfied?
Once your Scottish Trust Deed has been repaid and a certificate of satisfaction issued, you will be free to obtain credit again. However, a Trust Deed is seen as an admission of insolvency, and will, unfortunately, have a negative impact on your ability to obtain credit in the near future, and possibly longer term.
You may have to wait a while before going all out and applying for store and credit cards! Credit will almost certainly be more expensive for a while after your Deed is discharged and individual lenders will have their own policies regarding insolvent applicants.
Just because you owed money that you could not afford to repay immediately, does not mean your credit has to get damaged permanently. Although this option will stay on your financial records for 6 years, it still suggests that you took responsibility of your debts and once you pay your way out, you will be in a good position to obtain loans again.