Being in debt as a sole trader can be particularly concerning because you are personally responsible for the debts of your business. Unlike a limited company which is a separate legal entity from its owners/directors, sole traders face the prospect of personal bankruptcy alongside the closure of their business.
There are a number of debt solutions that could help, however, and one of these is called a trust deed. It is only for Scottish residents, and allows you to repay a pre-agreed proportion of your debts, whilst writing off the remainder.
An insolvency practitioner, or money advisor, will let you know whether or not you meet the eligibility requirements for a trust deed. These include:
Clearly, if your business is struggling, making a regular monthly payment in this way might be difficult. It does not discount you, however, and your individual circumstances will be taken into account by the trustee.
The financial issues your business is experiencing may be viewed as temporary when looked at closely by your money advisor, who will see the whole picture of your personal and business finances combined.
Once your trustee has put together a proposal, creditors vote on whether to accept the monthly repayment and level of debt that will be written off at the end of the trust deed – a term usually lasting four years.
It is often in the creditors’ interests to agree a proposal, as the amount that can be recovered may be more than if you were sequestrated (the term for bankruptcy in Scotland).
The trust deed becomes protected if creditors agree to the terms, after which they are no longer able to take legal action against you in relation to the debts included. All charges and interest are also stopped, giving you a valuable breathing space to take back control of your business finances.
There are many considerations to take into account if you are thinking of entering a trust deed as a sole trader. Scotland Debt Solutions can make sure you understand the benefits and drawbacks, and provide the professional advice you need. Call our highly experienced insolvency practitioners to arrange a same-day appointment free-of-charge.
The government has introduced a range of measures to help individuals, families, and sole traders in Scotland who are struggling to cope financially due to the coronavirus pandemic.
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Our Scottish based team can help advise you on your debt problems.