What’s the difference between IVAs and protected trust deeds?

March 22, 2013

According to insolvency statistics from Accountant in Bankruptcy (AiB), released earlier this year, bankruptcy numbers in Scotland fell by 30.5 per cent in Q3 of 2012/13 compared with the previous year.  The rising popularity of other viable debt solutions is clearly attracting an increasing number of debtors looking for an alternative to sequestration.

If you’re struggling with your finances, you might be considering all the options for clearing your debts. You may have come across two similar sounding debt solutions, and are wondering how they’re different. Whilst IVAs (Individual Voluntary Arrangements) and protected trust deeds may be confusingly similar, there are reasons why one may be more effective in your situation than the other. It’s important to be aware of the facts before making any financial decisions.

Both of these debt solutions are effective ways for people in Scotland to avoid sequestration (or bankruptcy). Whilst trust deeds are only available for Scottish residents, English and Welsh as well as Scottish residents, can apply for IVAs.

Generally, IVAs and trust deeds are made available to people with outstanding debt owing to three or more lenders. They must be approved by the majority of creditors before they are granted. They allow a set period in which to pay affordable amounts and any debt remaining afterwards will be written off. As with many debt solutions, once a legally binding contract such as an IVA or trust deed is awarded, you are protected from creditors threatening legal action.

Debt solutions like these offer an important alternative to people facing insolvency, which has serious financial consequences.

However, trust deeds and IVAs are separate debt solutions for a reason, and although ultimately aiming for the same outcome, the conditions of each suit different financial situations.

To apply for an IVA, normally you must have unsecured debts of around £15,000 or more and be willing to enter a legally binding payment contract, usually lasting for around five years. To apply for a trust deed, you must live in Scotland, have unsecured debts of around £10,000 or more and be willing to enter a legally binding contract similar to the process of an IVA, but only lasting around three years.  There are many terms and conditions to consider depending on your personal situation, all of which would are best discussed in detail with a financial expert.

If you think you might be eligible to apply for either of these debt solutions, contact our experienced advisers today who can work through your financial situation with you, and work out the most realistic solution. Both of these routes require real commitment, and you must be dedicated to making affordable monthly payments for the duration of the term.

It’s always wise to speak with a qualified professional before committing to any debt solution, and ensure it’s the right one for you. Why not call Scotland Debt Solutions today to discuss the reality of each debt option and create a clear picture of how you can reduce your debt in a way that’s affordable for you.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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