Trust deeds come with a wide array of pros and cons. However, their relevance will pretty much come down to your needs and situation. But before we delve into the ups and downs, just what are trust deeds?
According to Investopedia, a trust deed, also referred to as a deed of trust is a document that records the vital aspects of a property, and is held in a public place. It’s used in real estate transactions and comes into the picture when a party has taken out a loan from another in order to buy a home.
The Benefits of a Trust Deed
(i) Get Debt Written Off
Usually, Trust Deed payments last for four years, but in some situations, this could be longer. When this term ends, any unsecured debts that are still outstanding are written off. This means that if you know when your Trust Deed will end, you’ll know when you’ll be debt-free.
(ii) Single Affordable Payment
If you’re having a hard time paying unsecured debts, a Trust Deed will help you as you cover only a single monthly payment based on what you can afford. This instantly puts you back on top of your finances and prevents you from continually borrowing more in order to make ends meet.
(iii) Freezing of Interest & Charges
Your creditors are not legally allowed to add interest or charges to your accounts the moment your Trust Deed has begun.
(iv) Legal Protection From Creditors
The moment a Trust Deed is initiated, again by law, the creditors aren’t allowed to take any action against you in terms of collecting debts. They are required to also stop writing and calling you. Additionally, you’re protected from creditors attempting to get wage arrestment against you or even charging against your home.
(v) VAT debts and HMRC Tax can be Included
Given your Trust Deed proposal is feasible, the HMRC will agree to it and any personal VAT debts and tax you have can be included. So, if you run a business, a Trust Deed can be a good solution for dealing with debt issues according to this site here.
The Downsides of Trust Deeds
Similar to the benefits that come with Trust Deeds, they also have their fair share of downsides. So, before you decide to get into this debt management solution, it is important to know the downsides as well.
(i) The Homeowners Need to Release Equity
If you’re a homeowner, you’ll be obligated to release 100 percent of your share in any equity in your property in order to increase the amount that you have to pay the creditors. Normally a property valuation happens at the beginning of your Trust Deed, but the payment arrangements for the equity can be handled at any point during the Trust Deed.
(ii) Publicly Listed
Once you initiate a Trust Deed, even though the agreement isn’t specifically publicized in a local newspaper, you’ll be listed in the Scottish Insolvency Register which is managed by the Accountant in Bankruptcy. Keep in mind that this document is accessible to everyone on the internet and so, anyone can find out whether you are in Trust Deed.
(iii) Poor Credit Rating
Once you initiate a Trust Deed, your credit rating will become substantially worse. You can read this post for more information on how a Trust Deed affects your credit rating.