When it comes to trust deeds, there are certain questions people commonly have. Here at Trust Deed Scotland we’ve compiled five key ones, as well as the answers to each of them, to help you stay in the know.
What is the difference between a trust deed and sequestration?
Trust deeds differ from sequestration, or bankruptcy, in a number of ways:
- A trust deed is less formal than sequestration and doesn’t involve the court – it’s a private contract between you, your trustees and your creditors.
- If you’re a homeowner, you can still keep your home if you enter a trust deed.
- Unlike sequestration, you can borrow money without disclosing your status, be a company director, and qualify for elected public office.
Where they’re similar, though, is the minimum period for contributing to an insolvency estate. Recent legislation changes have increased this time for sequestrations from three years to four, on par with trusts deeds. This is thought to be the main reason why trust deeds today exceed sequestrations, according to government statistics – with no difference in the period of contribution, more and more people are shunning bankruptcy and going for the more ‘positive’ trust deed option. You can see more about these statistics on our post “Trust Deeds On The Rise In Scotland“.
Yes, a trust deed does affect your credit rating. This is because entering one means you’re breaching the original terms of your credit agreement. However, remember that if you’ve already missed credit payments or are paying your creditors decreased amounts, your credit rating may have been negatively affected, to begin with.
After you’ve completed a trust deed, it will show on credit reference agency files for another two years. Your credit rating will stop mentioning it when six years have passed since you first entered a trust deed.
When does a trust deed become protected?
A trust deed becomes protected once the majority of your creditors (two-thirds by debt value, or more than half by number) agree to the proposal. They can then no longer contact you for any reason or start any legal proceedings against you to recover debt.
However, you should know that even after your trust deed becomes protected, your trustees or creditors can still seek for your sequestration if they’re able to prove that it will give more back to your creditors than what a trust deed would.
What is the minimum debt level required to take out a trust deed?
The minimum debt level needed to enter a trust deed with Trust Deed Scotland is £5,000 (as compared to £3,000 for sequestration). Keep in mind that there are some trust deed providers that may require higher levels of debt for them to take on your case. And of course, you also need to have been a resident in Scotland for a minimum of six months and have an income, or someone willing to act as a third party, for you to qualify for a trust deed.
How do I set up a trust deed?
Setting up a trust deed with Trust Deed Scotland is easy. Enter your details on our website or call our office to arrange a free meeting with one of our debt advisors, who’ll then let you know all your options and help you find the best debt solution for you. Once we have all the information we need from you, we’ll start drafting your case.
At this point, we’ll also help you set up your first trust deed payment, which means you can immediately stop any current payments to your creditors. Before you start setting up a trust deed, though, try our Trust Deed Wizard to see exactly how one could help you become free of debt.
Get answers to more of your questions about trust deeds on our FAQ page.