Debt management program and a Scottish Church Deed are two separate things, and should not be confused with each other. The trust takes a more informal approach, and provides a conclusive step to let the creditor have his payments from his debtors over what-ever time it takes for the debtor to pay off his borrowings. This is a Protected Trust Deed, and is based on the proposal made by the debtor to re-pay the money that the debtor owes to his creditors.
Scottish Trust Deeds are applicable to the people living in Scotland, and this trust is taken to be an equivalent to the Individual Voluntary Arrangement (IVA). The trust is regulated by the bankruptcy act of Scotland formed in the year 1985. The Protected Trust provides a means to the debtor to pay off his loans, instead of facing seizure of property. The Trust applies to those debtors who are passing through bad financial crisis, and do not have enough disposable assets to liquidate his loans with. On signing the Trust Deed, all the loans as of that day are frozen and consolidated, after which a Trustee is appointed to look into the debtors re-payment matters. The appointed trustee then takes up the matter with the creditors, providing them with proposals in writing.
Scottish Trust Deed is a means to enable a debtor, who is suffering heavily from financial difficulties overwhelmed with unmanageable debts, to write a proposal for re-payment to his creditors. This proposal is distributed to all the concerned creditors, and in case the debtor owes no more than 1/3 of his total debt to any single creditor, vote to reject the proposal by any of the creditors becomes invalid. The Trust Deed then becomes legally binding to all the creditors who have been circulated with a copy of the proposal.
The Trust prepares a debt consolidation of all the debts of a debtor into a single debt, and provides a means for an affordable monthly re-payment over a period of 36 months. The debtor pays off his borrowing at the pro-rata rate as fixed by the Trust. The Trust itself goes into minute calculations in setting up such re-payment amount, after going into the details of the debtor’s financial matters, including his assets and liabilities. More-over, the trust looks into the debtor’s income, and the cost of living, and then works out an amount which the debtor is required to pay against the consolidated debt. The Trust especially looks into the affordability of the debtor in paying off the loan in the manner set out in the proposal. The debtor’s payment amount is so arranged, where the debtor has less possibility in being delinquent again, considering his commitments towards other priority payments, for example, his mortgage or rent, his car loan re-payments, utility and council tax payments, and more.
As and when the proposal is accepted by the creditors, the interest on the balance amount is stopped, and the amount gets fixed from that day onwards, with the creditors becoming legally bound by the Protected Trust. The debtor, on the other hand, has to maintain his part of the Protected Trust terms, and the final amount to be settled becomes the full and final settlement of the debt. If there is any outstanding balance, it has to be written off.
The debtor usually takes the help of a licensed Insolvency Practitioner known as a trustee, and this trustee could be the one appointed by the Protected Trust. The trustee has to perform with all honesty in preparing the draft bearing in mind the debtor and the creditors as well. The drafted proposal has to be realistic from both points of view, and should not be one sided. The draft is given to the debtor to be approved, and when done, the trustee makes the final trust proposal before circulating it to all the creditors.
When the Trust proposal is received by the creditors, they have the right to either accept or reject the proposal, or even ask for modifications and amendments before acceptance. Here again, the modifications and amendments, if any, could only be done with the debtor’s consent. If there are no replies received from the creditors, the proposal is deemed to have been accepted.
As the Trust Deed becomes protected, the appointed trustee acts as an observer, who looks into the progress of the deed and ensures the proper maintenance of the terms and conditions set in the Trust Deed. On successful completion of the payment, the debtor will be considered debt free. No matter what the amount was before, the sum settled in the deed would become the full and final settlement figure.
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January 20th, 2009 at 6:03 pm
[…] Scotland, there is a similar procedure to the Individual Voluntary Arrangement called a Protected Trust Deed (PTD). The Trust Deed, although similar to the Individual Voluntary Arrangement in many ways, lasts […]