Freedom!

A Trust Deed is a way of dealing with debts without the courts’ involvement. A Protected Trust Deed binds all creditors and stops any debt recovery process initiated by creditors. Basically what these mean, is that the borrower will attempt to pay off their debt, and once an agreement has been made the individual will be discharged from their debts.

Trust Deeds are only in Scotland, other countries have other ways of dealing with debtors and their debts. In Scotland, they use this as a means of trying to avoid formal bankruptcy proceedings. It harkens back to 1826, when Sir Walter Scott signed a Trust Deed in hopes of not declaring bankruptcy – and his creditors agreed to it believing that they would eventually see their money. They did eventually, once his copyrights were sold after his death. Definitely a better solution than the one they used prior to the Bankruptcy Act of 1913. Before this was passed, debtors with no means of paying off their creditors faced jail time in debtors’ prison. With the Bankruptcy Act of 1985, legislation was brought up to date and introduced the idea of public funding for non-asset sequestrations, automatic discharge, and apparent insolvency.

The 1993 amendments to the 1985 Act had a huge impact on Trust Deed. The Protected Trust Deed suddenly became an option to deal with debts in cases with assets and/or income. Many saw this as an option to bankruptcy and took this route instead. The Bankruptcy and Diligence Bill 2005 is currently being shopped around. Initial proposals would suggest that the Trust Deed will once again fall out of favor, although that would be a huge mistake for most consumers with debt issues.  ■