The Scottish Trust Deed debt solution option is available for Scottish borrowers. It may be more appealing than the sequestration bankruptcy process. There is greater flexibility and the deed information will not be published, as happens under bankruptcy. You may also not have to resign from public office, as required after bankruptcy. Your credit rating will get damaged, however, when you decide to enter this arrangement. The Register of Insolvencies will also put it on public record. But, after 6 years from the Trust Deed granting, no sign of it will remain on your credit report.
This voluntary agreement is legally binding. In this arrangement, the debtor grants assets to the selected trustee to be held in trust for creditors. The trustee must be qualified. The trustee becomes the chief party of contact thereby saving the indebted party from being the target of correspondence. This Scottish option is similar to an Individual Voluntary Agreement. This agreement remains in place for a specified period. Once the term passes, there is a write off of any debts remaining.
The process is less formal than sequestration with no court filing required. The debtor should cooperate with the trustee and comply with the agreed terms. The trustee may require contribution from earned income. For failure to cooperate, the penalty may be trustee petition for sequestration. In the best interest of creditors, the trustee may also decide sequestration is preferred. More powers are statutorily available to the trustee with sequestration.
If the borrower is without assets, the deed option is still possible. The borrower could pledge earnings instead. Those creditors who agree to the deed terms are bound to it. Others may still pursue the diligence forms available, including sequestration. The Protected Trust Deed option would prevent this recourse. However, the deeds eligible to be Protected Trust Deeds must be granted all property owned by the borrower that is not household property or present earned income.
The procedure to be followed for a Protected Trust Deed is a prescribed course. The trustee has to publish notification in the Edinburgh Gazette. Subsequent to the publication, all creditors should be contacted and provided with a copy of the published notification and the trust deed. This lets creditors know that the Trust Deed is to be protected. If, within 5 weeks of the published notification, no written objections are made by most creditors, or are not made by those holding at least a third of total amount outstanding, the Trust Deed becomes protected automatically.
If the majority of creditors object with the amount owed being above a mandated amount and the indebted party has not been sequestrated within 5 years, this rejection provides sufficient grounds for the indebted party to petition for their own sequestration. Also any creditor, or creditors, to whom the indebted party owes an amount that is not less than the mandated amount are entitled to petition for sequestration, within the established period after which the deed becomes protected. If the deed is not superseded by sequestration, it continues to operate even without becoming a Protected Trust Deed. This means that any charges and interest on the debt freeze and creditors cannot not approach the borrower for the duration of the period.
All costs associated with set up and administering are to be met from the estate transferred to the trust or from the earned income of the debtor. For the establishment of such an arrangement, there is no requirement for a minimum or maximum amount of debt. The deed can contain any terms acceptable to the creditors. Although it is possible not to transfer all assets, such a deed cannot acquire a protected status. It may also not be acceptable to all of the creditors.
Provisions for the borrower discharge is usually included in the terms of this arrangement. Should the deed be protected, this discharge will be bind all creditors. Should it not be protected, the discharge will only bind creditors who agreed to its terms. As long assets remain in trust, the trust deed will continue to operate even after the discharge. Upon the termination of its term, the credit report will show the outstanding debts covered by it have been cleared. This would not take place without this arrangement absent the borrower paying off the outstanding debts. Without it, debts would continue to rise with the associated accrual of interest and charges. Thus, although recourse to it will damage the credit rating of the borrower, this damage will be less than the alternative of sequestration or of doing nothing while amounts owed continue to mount.
As an alternative to going bankrupt in the Scottish Isles, a trust deed debt option may be appropriate for those buried under an impossible level of debt. There are trust deed pros and cons, so make sure you weigh your options carefully.
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