It is the duty of the trustees to understand the terms of a trust deed. It is also important for all parties to interact with the trust and for their professional advisors to have easy access to the deed. The trust deed lays out the terms of the trust and provides a general overview of the way the trust needs to be managed. It also provides discretions and powers to the trustees.
What is a Trust Deed?
People who have serious debt problems shouldn’t think that bankruptcy is the only solution for them. They can take advantage of a ‘trust deed’ which is an agreement made with creditors about repaying the amount that you own them. The trust deed isn’t as formal as bankruptcy and doesn’t include the legal restrictions that are put in place when you’re bankrupt.
The trust deed involves giving a trustee something valuable that you own, so they can sell it and raise money for paying off your creditors. The trust deed may also include you using your income to make contributions. A trust deed can also be recorded in the Register of Insolvencies and become a ‘protected trust deed’ if it meets some conditions. This also stops creditors from acting against individuals to get their money back if they are following the terms of the trust deed.
Advantages of a Trust Deed
· All debts will be frozen
If the creditor has agreed to the terms set in the trust deed, then all debts owed by you will be frozen at the beginning of the arrangement. The debt won’t have any interest added to it if you’re following the terms set in the trust deed.
· You can have a bank account
This bank account is mainly an instant access account where you may use cash cards but you don’t get an overdraft facility, cheque card or cheque book.
· You can still be employed
You should always check the contract of employment to ensure that a trust deed doesn’t affect your job.
· You may hold public office
You may have to check with some public bodies that have created their own rules for stopping people with debts to hold public office.
· Monthly payments change with circumstances
Your monthly payments may be increased or decreased depending on your circumstances.
· Protection for your assets
The best thing about a trust deed is that it allows you to protect your assets. If you have a home you can protect it by entering a trust deed.
Disadvantages of a Trust Deed
Even though trust deeds are a good way to protect your assets and repay your debts, there are some disadvantages of a trust deed that you should know about. These include the following:
- Unless the trust deed is ‘protected’ the only individuals that will be bound by the terms of the trust deed are going to be the creditors.
- Your trustee can make you bankrupt if you don’t cooperate with them.
- You can’t be the director of a limited company unless you are given permission from your trustee or the rules of the company permit you to enter a trust deed.
- There may be rules set by some public bodies that may stop you from working with them.
- Your credit score is going to be affected and this will prevent you from taking out additional credit while the trust deed is active.