Managing debt can be very difficult if you do not know how to manage your finances better. If you miss a few payments, the amount of interest will continue to increase and you will soon be left with a much bigger amount than you could have paid off previously. As a result of that, you are likely to become a target for the constant harassment of creditors. They are likely to harass you and your family and even threaten you with legal action until you clear their dues. Most people, when they are subjected to such means of mental torture, likely break down. However, that is not the solution.
Instead, the people of Scotland has a much better option. They can opt for a trust deed. The trust deed is a voluntary arrangement between two parties, the debtor and the creditor, which is set in place by the Insolvency Practitioner. An insolvency practitioner is a person that can be hired by a debtor in order to help him manage his debts properly. The insolvency practitioner will arrange a meeting with the creditors, and put before them a proposal which shows the amount of money that you can pay each month.
Basically, you are asked to make reduced payments over a period of 4 years, and at the end of the period, whatever debt is left unpaid is written off. However, the creditors have the option to suggest new adjustments to the proposal, or they can even refuse it outright. However, if a creditor agrees with the proposal and accepts it, the trust deed will become ‘protected’. This means that the creditor is now unable to add any more charges or fees on the initial debt amount, while they can also not threaten you with legal action or harass you in any possible way.
The protected trust deed serves as a great way for debtors to protect them from further harassment from the creditors, and also allows them to pay a set amount of money over a period of 4 years. Whereas they were previously making large amounts of payments as the amount of interest continued to grow, debtors will now be making controlled, reduced payments, ultimately clearing their mind and providing them with a set schedule to follow.
There are certain drawbacks of the protected trust deed as well. The biggest disadvantage of the trust deed, however, is that all existing action that was enforced, such as bank arrestments or earning arrestments will continue to remain in effect, while home owners will also have to deal with equity in their houses. Secondly, for as long as you are in the Protected Trust Deed, you cannot have a debt any greater than 500 GBP on your account. Also, whenever a person enters a Protected Trust Deed, their credit file is negatively impacted for the next six years, as a default is shown on the file. There are certain contracts of employment which prevent employees from signing a trust deed, as their contract prevents them from opting for an insolvency solution.
Therefore, even though the protected trust deed does have a great deal of benefits, there are a host of drawbacks associated with it as well. However, for people who are overburdened with a lot of debt, signing a Protected Trust Deed is a great idea and will effectively help them in getting out of debt in a much shorter period. However, make sure that you find a good insolvency practitioner, as they will also charge their fees from your monthly repayments, which means you’ll be paying a slightly extra amount.