1. Debt Consolidation for Simplified Management
One of the most significant benefits of a Protected Trust Deed is debt consolidation. For individuals juggling multiple debts, keeping track of various repayment schedules and creditors can be challenging. With a PTD, all eligible unsecured debts are consolidated into one affordable monthly payment. This streamlined approach eases the burden of managing multiple debts, ensuring that debtors can focus on a single payment plan tailored to their financial capacity.
2. Legal Protection: A Shield Against Creditor Actions
When a Protected Trust Deed is successfully set up, it is protected under Scottish legislation, offering debtors legal protection. This means creditors included in the Trust Deed cannot take any legal action against the debtor, nor can they pursue further recovery measures, such as wage arrestments or asset seizures. This protection provides much-needed relief and a safe haven from aggressive creditor tactics, allowing individuals to work towards resolving their debts without constant harassment.
3. Fixed Repayment Period with Debt Discharge
A Protected Trust Deed typically spans a fixed period, usually around 4 to 5 years. During this time, the debtor commits to making regular payments based on their financial circumstances. Upon successfully completing the Trust Deed term and adhering to the agreed-upon payments, any remaining unsecured debts included in the Trust Deed are legally written off. This discharge of debts offers a fresh start, free from the burden of those debts, paving the way towards financial recovery.
4. Freeze on Interest and Charges
Uncontrolled interest and charges can cause debts to spiral out of control, making it difficult for individuals to make meaningful progress in their debt repayment journey. With a Protected Trust Deed, once the arrangement is protected, interest and charges on the included debts are frozen. This freeze provides considerable relief, as it ensures that the debt’s principal balance remains fixed, allowing debtors to make steady and significant strides towards reducing their overall debt.
5. Affordable Repayment Plans
A critical aspect of a Protected Trust Deed is that it is tailored to each individual’s financial situation. The monthly payment amount is calculated based on the debtor’s income, essential expenses, and reasonable living costs, ensuring that the repayment plan is realistic and affordable. This approach fosters a sustainable payment structure that aligns with the debtor’s current financial capacity, making the journey towards debt freedom more manageable.
For those in Scotland facing overwhelming debt, a Protected Trust Deed offers a structured and legally binding solution that provides several invaluable benefits. From debt consolidation to legal protection, debtors can find a pathway towards regaining financial control and breaking free from the burden of unmanageable debts. By seeking advice from licensed professionals such as ourselves at Scottish Debt Help & J3 Debt Solutions, individuals can explore whether a Protected Trust Deed is the right solution for their unique financial circumstances.
However, there are some disadvantages to Trust Deeds which should also be considered.
Eligibility: Not everyone qualifies for a Protected Trust Deed.
Limited Debt Types Covered: Only unsecured debts can be included in a Protected Trust Deed, while secured debts (e.g., mortgages) remain unaffected.
Strict Adherence Required: Debtors must adhere strictly to the agreed-upon payment plan, and any failure to comply could result in the PTD being revoked.
Credit Impact: A Protected Trust Deed will negatively impact the debtor’s credit rating, making it challenging to obtain credit in the near term.
Public Record: PTDs are recorded in the Register of Insolvencies, making the arrangement a matter of public record and potentially affecting the debtor’s privacy.
Restrictions on Borrowing: During the PTD term, debtors may face restrictions on borrowing over a certain amount without their Trustee’s permission.