If your debt has gotten completely out of hand, you should not feel alone. With rising costs, it has become all too easy to find yourself in the unenviable position of not being able to repay your debt.

It starts out innocently enough; you get a credit card to use for “emergencies only” and then find a deal that you just cannot pass up. It seems harmless enough to take advantage of the store card that you are being offered.

Things are going along fine until there is some financial crises that means you need to borrow money. From there the debt spirals. You get another card to tide you over, and before you know it, you are up to your ears in debt that you have no hope of repaying.  

That is where a trust deed might be the ticket to helping you start over again. A trust deed takes the form of a legally binding agreement between yourself and those you owe money to. In it, you undertake to pay as much as you can to settle the debts.

Why Go This Route?

You could instead choose a debt repayment program. The problem with this is that your creditors are entitled to continue to add interest to the capital. The effect is that your debt takes forever to pay off.

In the interim, you will still need to deal with your creditors, and this can be a somewhat unpleasant experience. They are bound to badger you and try to make you increase the amount that you are paying.

With a trust deed, on the other hand, your creditors are not allowed to continue harassing you at all. You would approach a trustee who would analyze how much debt you have, and work with you to see if you qualify for this approach.

Who Qualifies?

  • You must either live in Scotland, have a business in Scotland, or have lived there within the preceding year.
  • You may qualify if your debts are at least £6 500.
  • You are receiving an income and have assets that can be sold. Your creditors must receive at least 10% of the outstanding debt.
  • You must be completely insolvent. That is, you are not in a position to pay the minimum amount on your debts, and you have liabilities that exceed your assets.

This is a method of dealing with debt in a more proactive manner. The process is not court-driven and can help you pay off your debt a lot faster than would ordinarily be possible.

The minimum term for this process is 48 months by law. If it is not affordable for you to repay your debts within that period of time, you can ask for this period to be extended.

Should you wish to remove yourself from the process early, you would have to discharge the interest as well as the capital amounts.

While the arrangement is in place, you will not be able to get any new credit facilities, but it does offer a better alternative to sequestration.

By Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to [email protected].