If you have been wondering what is trust deed then I would like to share what is trust deed.
What is a ‘Trust Deed’?
A trust deed is a notice for the release of merchandise to a buyer from a bank as well as with the bank retaining the ownership title to the released assets. The bank remains the owner of the merchandise, although, the buyer is allowed to hold the merchandise in trust for the bank, for manufacturing or sales purposes. The buyer of merchandise is subject to a trust deed that is required to maintain the merchandise as well as any proceeds of the sale of the merchandise including for remittance to the bank. Through this way, the buyer is permitted to use the merchandise for his business activities, along with the bank’s interest in the ownership of the merchandise is also protected.
A trust deed is a formal as well as a legally binding document that transfers part or all of the debtor’s assets or money and property to a trustee to manage for the benefit of the creditors for a period of time. The trustee will possibly ask the debtor to pay a specific amount of money to them from their income on a regular basis that is similar to an informal debt management program or DAS. This is a very private arrangement between a debtor and creditors.
The advantages of a trust deed for the debtor are the following:
- A trust deed avoids the greater expense, formality and stigma of formal bankruptcy
- There are no penalties or investigations regarding any offences and fewer disqualifications
The Disadvantages of a trust deed for the debtor are the following:
Any creditor who objects to the terms of the trust deed can still request the debtor’s bankruptcy with keeping in mind that the trust deed is recorded in the Register of Insolvencies as a protected trust deed (PTD). In some cases, the trustee can also request sequestration as well.
Signing a trust deed has serious consequences, for example, you might also lose your home
What is a protected trust deed?
- To become protected, a trust deed must meet certain requirements for it.
- The trustee must be a qualified insolvency practitioner as well
- The trust deed must transfer all assets possessed by the person that would be taken over by the trustee as if the debtor had been sequestrated and
- It must be properly advertised in the Edinburgh Gazette along with the trustee must notify all known creditors
A trust deed usually becomes a protected if it meets all these conditions unless the majority in number or one-third in value of the creditor’s objects in writing is within five weeks of its advertisement in the Edinburgh Gazette. A trust deed is binding or agreement on all creditors when it becomes protected which is similar to DAS in that it stops creditors from seeking to enforce their debt by diligence or sequestration. Money advice and expert professional advice is essential if you are considering to create a trust deed.
A deed of trust has a crucial advantage over a mortgage, from the lender’s point of view as if the borrower does not pay the loan then the trustee has the power to sell off the property on behalf of the beneficiary.