Trust Deeds are legally enforceable document entered to save precious time of parties into the lending transaction. There are three legal parties to this arrangement:
One who owes money to others, In other words, he/she is legally required to return or repay a certain amount of money to an identified entity.
He is supposed to rightfully receive money or repayment from DEBTOR at stipulated time frame along with interest, depending upon agreed terms and conditions.
Trust Deed is executed between Debtor and Creditor in favor of Trustee, wherein Debtor vests her/his estate with a Trustee, who ultimately may use it for the ultimate benefit of Creditor.
Six-month-old resident of Scotland can legally execute trust deed in Scotland. It is the specialty here as it is exclusively practiced or followed therein and such Deed has not seen the light of the day in any other nation or continent not even neighboring areas like England.
One must take consultation from insolvency practitioner who will adequately advise available options basis existing financial scenarios by evaluating factors such as Income to Debt ratio. This service, however, comes with a professional fee.
Variants of Trust Deeds
Two variants are available for Debtors-Protected and Unprotected Trust Deed
- Protected Trust Deed is legally enforceable, however,five-week period has been allotted for appeal by a creditor
- Unprotected Trust Deed cannot be enforced; hence it is always advisable to protect Trust Deed in everybody’s interest. Trust Deed of at least Euro Five Thousand are eligible to become protected, otherwise, they will remain as unprotected.
Once Debtor enters into Trust Deed, he is prohibited from availing any further debt or funding. Further, he is required to exercise utmost cooperation with the trustee and duly inform him of any impending identified contingency. His basic responsibility includes regular debt servicing, without any failure.
An interesting feature is the revision of terms vis a vis debtor’s financial condition. In simple terms, if debtor faces unwarranted situations like unemployment, Trustee may review given income scenario and reduce his monthly debt servicing to fit given situation.
Similarly, any improvement in Debtor’s financial condition will lead to increased monthly payment. Any dispute between Trustee and Debtor may be escalated to Sheriff for settlement or discharge, as the case may be.
It may be a restrictive clause in many organizations which disable salaried professional to enter trust deeds in Scotland. One must check with respective HR or Company policy to avoid rendering given arrangement Null and Void in the future.
One of the biggest demerits of this thing is its direct impact on one’s Credit Rating. This is made apparent for straight six years, without any relaxation. So, it is advised to take the guidance of experts before you take any move in the near future.