When debtors become insolvent, paying off their loans can be quite the hassle. This is why most of them go for the option of a protected trust deed. In this article, we will find out more about how a protected trust deed works, its pros and cons.
Requirements for Entering Into a Protected Trust Deed
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- You must be presently residing in Scotland or have recently resided in Scotland. If not, you should have a business in Scotland.
- You owe £5,000 or more in unsecured debt.
- You are in a position to contribute to your earnings. Alternatively, you have investments that will allow you to repay your creditors.
- You’re insolvent, which means you can’t pay your bills when they’re due. In addition, your loans exceed your assets.
How Does the Protected Trust Deed Work?
If you meet all the requirements, a Protected Trust Deed is a good option for you to repay your debts without losing everything. You will simply sign all necessary documents, and your Trustee will work to protect the Trust Deed.
By gaining protected status, your creditors will be unable to pursue legal action against you to recover their debts. To gain this special protection, the Trustee must not obtain objections from a majority of lenders. Normally, creditors owed above two-thirds of the total loan should agree to the protected trust deed.
The Trustee’s major responsibility after you’ve been protected is to ensure all your debts are paid. They do this by collecting your contributions and liquidating your assets. After this, they make the agreed-upon payments to your creditors.
Remember, your agreed-upon contribution is reviewable at least once a year, or at any time if your situation changes. Your Trustee will make the last payment to your creditors and process your discharge.
This happens after the stipulated payment period which is usually 48 months. Your remaining obligations are lawfully written off once you’ve been released. At this point, your Secured Trust Deed is finished!
The 9 Benefits of Using a Protected Trust Deed
- You are safe from creditors taking legal action against you.
- All regular living expenditures and household bills are covered by a single, inexpensive monthly payment.
- Creditor communication will be discontinued. This is because your Trustee will communicate with creditors on your behalf, relieving you of the stress of regular phone calls and upsetting correspondence.
- Interests, charges, and fees are all locked as of the date you execute your Protected Trust Deed.
- There are no legal procedures involved in a Protected Trust Deed.
- Your house and other possessions can be kept, depending on their worth and circumstances. Remember to seek legal counsel as soon as possible if you have properties you want to protect.
- If you are facing legal action and have selected a Trust Deed as your borrowing solution, you can submit the Trust Deed right away.
- Your assets will no longer face the threat of an earnings arrest and detention.
- You will be dismissed from all leftover debts and the sums will be written off after successful completion of a Trust Deed.
The Disadvantages of Protected Trust Deeds
- Your credit score may suffer as a result.
- Creditors may raise enough objections to the Trust Deed plan to prevent it from achieving protected status.
- Before or after your release, issuing a Trust Deed may lead to you being denied credit.
- Unless the business’s memorandum of association allows it, you may not be permitted to operate as a member of a limited company.
- In a Trust Deed, student loan debts are not discharged.
- In some cases, your home and other investments may be used to repay your creditors. Therefore, always seek legal advice if you have assets that you need to safeguard.
- Signing a Trust Deed may have an impact on your job or future job chances.
If you choose to get a Protected Trust Deed it will be recorded on the Registry of Insolvencies. This is a publicly accessible online database of all Scottish insolvencies. Remember, your trustee has a right to assets obtained for 4 years after signing the deed.