How to prevent bankruptcy: Advice on Trust Deeds

If you feel trapped by your debts and are no longer able to make the repayments expected of you, you may feel like there is no way back, although bankruptcy (or sequestration in Scotland) can be forced upon you by your creditors, if you decide to deal with your problems early enough there may be a solution for you. Trust Deeds are a form of financial insolvency and alternative to bankruptcy that could help you on the path to financial stability.

What is a Trust Deed?

If you are in similar circumstances to these you may have heard of a Trust Deed, well let’s explain exactly what it is;

  • A Trust Deed is an agreement between you and your creditors that you will repay a percentage of your debt over a set period of time, normally 3-5 years, after which the remaining debt will be written off.

What is a Protected Trust Deed?

  • A Trust Deed becomes a Protected Trust Deed if enough of your creditors accept the proposed agreement, if this happens it will become legally binding and none of your creditors will be able to chase you for any of the debt included in the Trust Deed.

How to get advice about Trust Deeds

  • Entering a Trust Deed can have a very serious impact on your life and it is crucial to seek professional advice from an approved money adviser before considering this option. Trust Deeds can only administered by a licenced insolvency practitioner and so you must contact a financial insolvency company in order to apply for a Trust Deed, the Trustee as they are known.

Advantages of a Trust Deed

  • Monthly repayments are only what you can afford, when applying for a Trust Deed the Trustee will assess your personal circumstances and draw up an agreement that is right for you.
  • You can protect your home from being sold for the benefit of your creditors.
  • The Trustee will carry out all administration on your behalf.
  • You will not have to deal directly with any of your creditors.

Disadvantages of a Trust Deed

  • Home owners may have to release any equity they have on their home.
  • Your credit rating may be severely affected.
  • Your creditors are allowed to object to a proposal of a Trust Deed.