Write Off Unaffordable Unsecured Debts
With A Scottish Trust Deed...
Trust Deeds vs IVAs (Individual Voluntary Arrangements)
When you started finding about debt management solutions, it probably didn’t take long before you discovered IVAs and Trust Deeds. Chances are though it probably wasn’t – and still isn’t - at all clear to you what the difference between the two actually are. And if you don’t know the differences, you won’t understand just how effective they can be under the right circumstances.
First of all, they are effective solutions for dealing with debt and avoiding sequestration. They are also both very serious undertakings and only to be considered after an in-depth discussion about your finances with a Trust Deed or IVA expert. They are both formal legal agreements between you and your creditors which stipulates you will pay back your debts through an Insolvency Practitioner who will act as a Trustee and mediator on your behalf. And of course, their real power lies in the fact you pay back only what you can afford and then whatever unsecured debt is left at the end of the agreement is written off.
However, it is the differences between an IVA and Trust Deed that are the most important.
Trust Deeds are only available to residents of Scotland while IVAs are for residents of England and Wales. You can only apply for an IVA or Trust Deed if you have been a resident in the appropriate country for six months.
How much do I have to owe to qualify?
You only need to have unsecured debts of £10,000 to take out a Trust Deed, whereas you need unsecured debts of at least £15,000 to take out an IVA.
How long does it last?
IVAs and Trust Deeds run for differing amounts of time. Trust Deeds last 48 months or 4 years while IVAs usually last 60 months or 5 years. That makes Scottish residents very lucky and they can look forward to a debt-free future a lot sooner! There are certain circumstances where you might to make additional payments beyond this, but generally the agreement lengths are set. An IVA or Trust Deed adviser can explain further under what circumstances extra payments may need to be made.
What happens next?
Once an IVA is granted, all of your assets should be transferred to your Trustee or IP, which will protect you from legal action by your creditors. However, with a Trust Deed, your Trustee or IP must apply to have it ‘protected’. Only then can you be safe from your creditors. Some people have found this useful for preventing certain assets from being part of the Trust Deed, although it can cause problems if creditors think you are holding back on something that could be used to pay off your debt. This could result in them knocking back your Trust Deed application and starting sequestration proceedings.
However IVAs and Trust Deeds are actually remarkably similar in many respects:
1. To have either, you must owe money to two or more creditors
2. You should have a monthly income of more than £150
3. Your payments are based on affordability
4. Secured debts cannot be part of a Trust Deed or IVA agreement; only unsecured debts can be put forward
5. At the end of the arrangement term, any unsecured debts are written off so you can have a completely fresh start
6. Both Trust Deeds and IVAs are ideal when your job prevents you from going bankrupt or being sequestered.
7. You can hold public office or be a company director with either an IVA or Trust Deed
8. All windfalls in excess of £200, such as inheritances, bonuses and lottery wins, must be declared
9. Both IVAs and Trust Deeds are recorded on a public register
10. Both IVAs and Trust Deeds affect your credit record and are recorded on your credit file.
IVAs and Trust Deeds are extremely effective debt management solutions and have helped hundreds of thousands of people pay off their debts.
However, like all financial products you need to make sure they are right for your circumstances, and you need to weigh up the pros and cons of all the possible courses of action you could take with the help of an IVA or Trust Deed expert.