Trust Deeds are a form of insolvency practiced in Scotland. If you are in England Wales or Northern Ireland then the equivalent process is IVA Debt Consolidation.
A Scottish Trust Deed is negotiated by a professional Insovency Practitioner.
During this process the Insolvency Practitioner will establish what you can afford to pay against your debts based on your personal circumstances, namely your disposable income (after living costs have been accounted for).
Once this calculation has been made, the Insolvency Practitioner will try to negotiate with your creditors to have a portion of your debt written off, in line with what you can actually afford to pay.
If more than half of your creditors agree, and that half account for more than two thirds of your total debts, then the Trust Deed will be agreed.
A Scottish Trust Deed is a legally binding agreement. Once entered into your creditors will no longer be able to persue you of additional monies (no more letters or demands).
Once in place you will begin making payments to the Insolvency Practitioner who will then distribute the money between your creditors.
Why Would Creditors Agree To Write Off Debt?
A Trust Deed is a form of insolvency, a very serious matter. Only those who really cannot afford to service their debts and are in serious financial difficulty are considered.
The reason creditors will take a reduced payment from debtors in this situation is to help avoid bankruptcy proceedings where they (the creditors) stand to lose even more money.
Bankruptcy also has a serious impact on the debtor as more assets can be taken, and there are restrictions placed upon what they can do regards lending and business interests in the future.
So, a Scottish Trust Deed is a form of damage limitation both on the part of the Creditor and the Debtor.