Trust Deeds in Scotland

[Crocdoc]

I have seen numerous cases in recent months of property owners entering into Trust Deeds, I can only assume that this situation is to some extent due to the constant glossy television adverts implying that Trust Deeds are some kind of miracle cure for debt problems.

 

In reality Trust Deeds can be disastrous for home owners in situations where there is equity in the property.

 

To create an example

 

Two partners share a home with equity of £30000, one partner has unsecured debts of £20000 and disposable income of £150.00 per month. Term of Trust Deed 36 months at £150 per month = £5400 over the term. This leaves a shortfall of £14600.

 

Now comes the sting in the tail, the trustee will then insist that the debtors share of the equity is released from the property. This can prove to be very difficult if not impossible as the debtor will be unable to borrow the shortfall due to his /her credit rating and a listing on the register of insolvencies.

 

In many cases the Trustee will suggest that the other partner should try and raise funds to buy out the debtors share of the mortgage. Easier said than done, bearing in mind that the two parties are financially linked as they share a joint mortgage. To cut a long story short the trustee can then apply to the courts to sell the property to release the shortfall.

 

IT IS IMPORTANT TO REMEMBER THAT DESPITE THE SMILEY FACES ON THE TELLY, IT IS THE TRUSTEES ROLE TO ACT IN THE INTEREST OF THE CREDITOR AND NOT THE DEBTOR. THE REASON THAT WE ARE NOW SEEING A DRAMATIC INCREASE IN ADVERTISING IS SIMPLY BECAUSE TRUST DEEDS ARE BECOMING A THING OF THE PAST AS FREE ADVICE AGENCIES ARE PHASING THEM OUT IN FAVOUR OF OTHER OPTIONS SUCH AS DAS WHICH IS DESIGNED TO PROTECT PROPERTY.