Write Off Unaffordable Unsecured Debts
With A Scottish Trust Deed...
Trust Deeds vs Sequestration
Are you facing the possibility of sequestration? Are your creditors treating you badly and piling on the pressure and stress.
You may have spent countless hours finding out about debt solutions such as sequestration, Trust Deed Scotland and payment plans but haven’t been able to take action on any of them.
You probably feel at the mercy of an onslaught of conflicting emotions such as fear, anger and frustration. You’re trying to cope with the sense of failure and loss of confidence that debt leaves in its wake, probably feeling powerless and resenting the loss of control over your financial affairs too.
At this point some people think, “enough is enough”. They give up and let themselves be sequestered.
However, many don’t. Many people suddenly find that a deep sense of self-preservation and pride suddenly kicks in. They don’t WANT to be sequestered. Yes, it wipes the debt slate clean, but there is a small part of them that feels they can rescue the situation, that their financial problems can be sorted out and for them a Trust Deed is a lifeline to doing it.
But wouldn’t it just be better admit defeat, to swallow your pride and let yourself be sequestered? Not necessarily - there are some big advantages a Trust Deed has when compared to sequestration.
Advantages of a Trust Deed
Your creditors cannot hassle you any longer
Creditors cannot chase you for money if you have a Protected Trust Deed. They must communicate only with your Insolvency Practitioner, which will relieve a major source of stress for you. This does not happen with sequestration - your creditors will continue to plague you right up until the time you are sequestered. Some individuals have reported creditors trying their luck after a sequestration as well, hoping to confuse or trick them into giving them some money.
Trust Deeds do not have the stigma that sequestration does as there is very little chance that anyone can find out about it. Iif they do, it can be easily and quickly explained as a form of debt payment plan and no-one will be any the wiser.
Self-esteem and confidence
Your self-esteem takes a battering with sequestration and can leave you with feelings of guilt and unhappiness for months afterwards. A Trust Deed can go some way to helping you build up your confidence, as well as giving you back control over your own finances.
New financial management skills
Sequestrations do not help you sort out the underlying poor financial habits that led you into debt, so there is always the risk of history repeating itself. On the other hand a Trust Deed helps you to develop your budgeting skills and encourages you to live within your means, giving you a firm foundation to build the rest of your financial future upon.
Protect your career
Sequestration is forbidden with certain jobs, such as if you hold a position of fiscal responsibility or are in public office. A Trust Deed can help you to preserve your career, allowing you to carry on relatively unscathed.
Disadvantages of a Trust Deed
Like all financial products, a Trust Deed has its disadvantages compared to sequestration which you need to understand and take into account when making your decision on whether to have one.
Length of a Trust Deed
A Trust Deed takes a number of years to pay off – usually three years - do you cannot start building your credit rating up until you have finished your payment plan and been discharged by your Insolvency Practitioner.
On the other hand, sequestration happens quickly in comparison. You could be debt-free within weeks, and then concentrate on building up your credit rating until that record of sequestration disappears off your credit file.
It affects your credit rating
There is no way of having a Trust Deeds without having your credit rating affected, but then the same thing is true of sequestration and sometimes the later can look far worse because of the stigma attached to it.
You may have to sell your property
Part of a Trust Deed is entrusting your assets to you Insolvency Practitioner for valuation, and this includes your property if you have equity in it. Your IP may ask you to remortgage it at both the beginning and end of the Trust Deed to release some of the equity for your creditors. For many, the only way to raise this lump sum is to sell up as a lender may be unwilling to allow a debtor to remortgaged and extend their credit. Family members can step in and pay this lump sum on your behalf – perhaps as an advance on an inheritance or even outright gift - to ensure this does not happen.
Of course if you are have no equity or are in negative equity then there is nothing that can be released, but an IP has the power to sell your property up to three years after your sequestration if its value increases.
As bad as this sounds, in fact you do have more flexibility with a Trust Deed than with sequestration. Then you house will definitely have to be remortgaged or sold to pay creditors if you have any equity in it.
Sequestration is certainly a way of wiping the slate clean, but it is not always the best way. Money is a very emotional subject, and for many there is a lot of pride and self-respect tied up with being able to manage their money, and both could be irrevocably damaged by sequestration.