Trust Deeds Guide Scotland

PTD or a protected trust deed a legal contract that allows Scottish residents and binds them in repaying their debts over an extended period of time and at affordable costs. Once the PTD comes into force, interest and other charges are frozen so that the debtor is freed from the cascading effect of regular interest addition to the outstanding liability. If the debts brought under the trust deed are not paid off in 3 years, the remaining debt is written off in terms of the trust deed. A mandatory provision for a trust deed to come into operation is that at least one third of your creditors must not have objected to the PTD. It should be understood though that creditors are not obliged to agree to a PTD proposal. A PTD is an effective option when your unsecured debts are in excess of £5,000.

Only Secured Debts

Only unsecured debts like personal loans, credit cards, catalogue accounts, bank overdrafts, store cards, and similar debts can be brought under a PTD. All secured credit will be outside the PTD and you will continue to meet the regular payment obligations under such credit. Your mortgage payments for instance, ranks as a secured credit and therefore not eligible to be placed under the PTD. A minimum of £50 every month should be contributed under the PTD and you must be able to pay at least 10% of your total debt across the currency of the PTD.

Your Benefits

On an approved PTD you will make a single payment towards all your debt brought under the PTD. However, if you fail to meet this commitment or receive a windfall during the currency of  the PTD, you will have to pay all interest and charges apart from accumulated dues. Conversely, if you stick to the payments under the PTD with great discipline, you will become debt free in 3 years paying a fraction of your total debt. Similarly, your creditors cannot initiate punitive action against you or harass you for their dues. In comparison to sequestration, the hurdles in obtaining fresh credit are minimized when you opt for a PTA

Conditions

A qualified insolvency practitioner must be the trustee under a PTD and the trust deed should transfer all assets to the trust as though you have been sequestrated.  The PTA must be appropriately advertised in the Edinburgh Gazette and creditors notified. The trust deed is automatically protected when these conditions are satisfied except when majority creditors or one third value of creditors object to the PTA.

Your Constraints

If the terms of the PTD are violated, it can potentially lead to bankruptcy or similar actions. When you apply for a trust deed fresh credit will not be available to you. In some situations, home equity may need to be released to pay the creditors. Your credit score will suffer for 6 years after completion of the PTD. You may also want to check your employment contract to confirm if you are allowed to enter a PTD. Your income as well as expenditure will be periodically reviewed and the monthly payments under the PTD adjusted accordingly. A remortgage will be more expensive than the original mortgage and if you fail to obtain a remortgage your PTD may be extended by one year.

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