subject: Pertinent Details About The Scottish Trust Deed Debt Solution [print this page] The Scottish Trust Deed debt solution offers Scottish borrowers a more appealing alternative to sequestration, the process of bankruptcy. There is unavoidable damage to the credit rating. But, 6 years after entering into this arrangement, the credit report will no longer show it.
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 has no assets, a deed remains an option. Earnings can be pledged instead of assets. Only creditors who agree are bound by the deed terms. Those who do not agree may pursue the available diligence forms, such as bankruptcy. Some deeds may be eligible to be upgraded to Protected Trust Deeds. With this option, the debtor prevents diligence by creditors disagreeing with the Trust Deed arrangement. But, for this to be possible, the debtor must transfer all property owned except household property and current income.
There is a procedure to be followed for a deed to become a Protected Trust Deed. This commences with the trustee publishing in a prescribed newspaper a notice of the deed. Thereafter, the creditors are contacted and provided with a copy of the published notice and a copy of this agreement. This missive to the creditors advises them the deed is to become protected. If, within a set number of weeks after publication, written objections are not received from a majority of creditors, or are not made by creditors representing a third of amount covered, the deed automatically becomes protected.
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.
The cost of establishing and administering are paid for from the transferred assets or the earnings of the indebted party. You do need to meet a certain minimum or a certain maximum amount to be able to establish this arrangement. The agreement can have any acceptable terms for creditors. If all assets are not transferred to this arrangement, it cannot acquire status of a protected deed.
Provision for borrower discharge is typically included in the agreed terms of the deed. Only with a Protected Trust Deed is this discharge binding on every creditor. A deed continues to operate after discharge if any assets remain under trust. On termination of the established term period, credit reports will not show debts covered by it. Without this arrangement, debts would continue to grow with mounting interest and charges. Hence, despite damage to the credit rating, there is benefit to the borrower who escapes bankruptcy or mounting debts without this recourse.
by: Brian Bowie
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