Understanding a Scottish Trust Deed

Insolvency can be a difficult thing to wrap your head around at the best of times – when it happens to you, the stress and confusion can pile …

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Insolvency can be a difficult thing to wrap your head around at the best of times – when it happens to you, the stress and confusion can pile up quickly to leave you with what appears to be an insurmountable in problem. In England and Wales an IVA (Individual Voluntary Arrangement) is the way you would generally file for personal insolvency – in Scotland there is something similar known as a Trust Deed. When it comes to understanding a Scottish Trust Deed there are a lot of questions which spring to mind so we’re going to go over the basics of what you need to know, along with some of the frequently asked questions surrounding this form of insolvency.

If you live in Scotland and have more than £5000 in unsecured debts, the chances are that a Protected Trust Deed is the right option for you. The quickest way of seeing if you qualify for a one of these Trust Deeds is usually through a site like Trust Deed Scotland which has an on-page Wizard which can check your eligibility. If successful, you can group all of your debts under one umbrella, paying back as much as you realistically can over a 48 month period. Once that’s done, the remainder of your debt is written off, and you’re legally declared debt free once more.

Unfortunately Protected Trust Deeds don’t cover secured loans such as mortgages. However, this in turn means that you can enter into a Trust Deed whether you own your own home, a tenant renting a property or even if you’re living with parents or family. You won’t even have to complete a credit check in order to secure a Scottish Trust Deed either, although it is generally recommended that you do. This way you can flag up any debts which you may have forgotten about before you enter into the Trust Deed – this is important because just as creditors can’t walk away from your Trust Deed once signed, you can’t retroactively add extra debts to the agreement either.

On that note, a Trust Deed will affect your credit rating. While under a Protected Trust Deed you will not be able to take out any forms of additional credit, so for the next two years your credit rating will be of little consequence. However, it is important to realise that your Trust Deed will remain on your credit file for six years from the date you sign the paperwork. If your finances are bad enough that you’re considering a Trust Deed, your credit score should be the least of your worries – you will be able to start rebuilding your credit rating as soon as you’re released from your Trust Deed.

Another question which is frequently asked is whether or not taking out a Trust Deed is the same as filing for bankruptcy (also known as sequestration in Scotland). They are not the same thing, and there are some major differences between the two – for example, a Trust Deed does not affect your living situation and you will not lose your house as a result of taking one out. The same cannot be said for bankruptcy. With this in mind, if you default on your repayments you will open yourself up to being chased by debt collectors once more. This can lead to a wage arrestment or even bankruptcy, so it is imperative that if you take out a Protected Trust Deed, you make your repayments on time every month.

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