Trust Deeds: Are They Right for You?

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consumer debt, debt consolidation, debt management, debt payoff, trust deeds

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The following is a guest post. Enjoy!

If you’ve ever been in financial difficulty and carried out some research into Scottish debt solutions, no doubt you will have heard of a Scottish Trust Deed. What with the huge number of adverts on the radio and television, it’s nearly impossible to not have heard of them at least! A lot of the adverts claim to ‘wipe out your debt’ and ‘cancel up to 90% of your debt’, which sounds like a dream come true!

However, can these companies come good on their promises, and is a Trust Deed right for everyone?

The facts

A trust deed is a formal insolvency solution that has existed since at least the 1800’s. Sometimes, it’s called a Scottish Trust Deed, but this is only because a Trust Deed is only available to Scottish residents. The way a Trust Deed works is that if your finances get out of control and you find yourself owing large amounts of money to various sources that you cannot afford to pay back, you effectively place your estate in the hands of a Trustee (a licensed insolvency practitioner), who is responsible for creating a plan that sets out an agreeable solution for both you and the people that you owe money to. This means that you agree to pay what you can afford each month towards your debts, while your creditors agree to give you some debt relief (meaning you don’t have to pay back the full amount that you owe all of your creditors).

Why is it useful?

A Trust Deed is a useful solution for individuals who have substantial debts because it allows them to contribute to their debts by paying an affordable amount each month. When I say ‘affordable,’ I mean that you contribute what you can after paying for essentials, like food, rent and bills etc. Your Trustee is the person who would help decide what’s essential, as he is the person who creates the plan for paying back your debts. A Trust Deed is also good for creditors because it means that they get to see some of the debt their owed repaid, rather than having to pursue someone through debt collectors and the courts etc.

The myths!

A trust deed can be a great solution for individuals with substantial debts. However, it’s not as simple as just ‘writing off you debts’. For instance, you have to be employed or have a regular income, as you are expected to contribute something towards your debts. Another fact is that your Trustee has to act in the best interests of both you AND your creditors! For example, if you own a house that has equity in it, unless you or a friend can cover that cost, you may have to realize the equity in your home to benefit your creditors. That means potentially selling and moving into a new house. There are ways to avoid this, but only a licensed insolvency practitioner can advise you on that. These are just a couple of examples of how Trust Deeds are not as simple as some companies would like to make them seem.

What can I do?

If you’re considering entering into a Trust Deed, then your first port of call should be to look online. There is an abundance of websites out there that will explain a lot of the ins and outs of Trust Deeds. Better yet, speak to a debt expert. A licensed insolvency practitioner will know best about whether a Trust Deed is right for you or whether another debt solution is best.

How about you all? Have you ever heard or or used a trust deed? If so, what are your thoughts about them?

Share your experiences by commenting below!

***Photo courtesy of http://www.flickr.com/photos/7259240@N03/5531511558/sizes/l/in/photostream/

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