What are the Benefits of a Trust Deed for Those in Debt

A trust deed is a formal agreement between a debtor and their creditors. It is a legally binding contract that sets out a repayment plan for the debtor, usually over a period of three to five years. The debtor pays a fixed monthly amount to a trustee who distributes the funds among the creditors. The goal of a trust deed is to help the debtor repay their debts while protecting them from legal action by their creditors.

There are many pros to entering into a trust deed agreement. Let’s take a closer look at some of them.

Affordable Repayments

One of the biggest advantages of a trust deed is that it allows the debtor to make affordable monthly payments to their creditors. The trustee will negotiate with the creditors to set a fixed monthly payment that is within the debtor’s means. This means that the debtor is not overwhelmed by their debts and can manage their finances more effectively.

Protection from Legal Action

Once a trust deed is in place, the debtor is protected from legal action by their creditors. This means that the creditors are not allowed to take any legal action against the debtor to recover their debts. The debtor is free to focus on repaying their debts without the constant threat of legal action hanging over them.

Debt Reduction

In some cases, creditors may agree to write off a portion of the debt owed by the debtor as part of the trust deed agreement. This means that the debtor may be able to reduce their debt burden significantly. The amount of debt that can be written off will depend on the individual circumstances of the debtor and their creditors. However, even a small reduction in the amount of debt owed can make a big difference to the debtor’s financial situation.

Clear End Date

One of the key benefits of a trust deed is that it has a clear end date. The agreement is usually for a fixed period of three to five years, after which the remaining debt is written off. This means that the debtor knows exactly when they will be debt-free and can plan their finances accordingly.

Professional Support

When a debtor enters into a trust deed agreement, they are assigned a licensed insolvency practitioner. This professional will act as the trustee and will manage the trust deed on behalf of the debtor. The trustee will negotiate with the creditors to set a repayment plan that is affordable for the debtor. They will also provide support and advice to the debtor throughout the process.

Credit Rating Protection

Entering into a trust deed can protect the debtor’s credit rating. While the trust deed will be noted on the debtor’s credit file, it is not the same as having a default or a bankruptcy on their record. Once the agreement is completed, the debtor’s credit rating will start to recover.

Less Stressful than Bankruptcy

Entering into a trust deed is often less stressful than filing for bankruptcy. Bankruptcy is a more extreme measure that can have significant consequences for the debtor, including the loss of assets and restrictions on employment. A trust deed, on the other hand, is a more manageable way of dealing with debt that can provide the debtor with greater control over their finances.

In conclusion, a trust deed is a good option for people who are struggling with debt. It offers affordable repayments, protection from legal action, debt reduction, a clear end date, professional support, credit rating protection, and is less stressful than bankruptcy. If you are struggling with debt, it is worth considering whether a trust deed is the right solution for you.