What to look out for when opting for a trust deed

A trust deed is a voluntary but legally binding agreement between a creditor and an individual. It is signed when an individual is unable to meet their debt obligation and is seeking to avoid bankruptcy. There are various considerations that one needs to put in mind before he can qualify for a trust deed and settle for a trust deed. These considerations are provided below you must look for them in order to get the best out of them.

 

Loss of Assets

In a trust deed, an individual transfers their assets to the trustee. In trustee seeks to settle the debt through managing the assets. In this cases, the assets are sold off, and therefore, the individual loses all their assets in a bid to be debt free. A trustee may also seek to sell the equity portion of your home. However, in a protected deed, the trustee is prevented from selling your home equity to recover the debt. Therefore, before settling for trust deeds, you need to be aware that your assets will be sold off.

 

Creditors not Bound

In a regular trust deed, the creditors are not bound by the agreement until they have signed up. Creditors will usually consider the odds to recovering the outstanding debt in other ways before agreeing to sign a deed. They must be convinced that the individual is unable to make debt repayments and that they may face a bankruptcy loss if they do not sign up for the agreement. Therefore, for the creditors who feel that they have other options to recover the outstanding debt, they will not sign up for the deed, and therefore, they will continue to follow the debtor and seek their funds in alternative ways.

 

Credit Rating is Severed

Once you sign up for a trust deed, your credit rating is completely severed. You can, therefore, most likely not qualify for any further debt. It may also take a while before you can bailout and repair your credit rating. The severed credit rating will affect your utility credit, your credit card interest rates and may also affect your employment. You, therefore, need to be aware of this before signing the deed.

 

Avoid Bankruptcy

Signing a trust deed may help you escape bankruptcy. Bankruptcy can be humiliating, and the process is quite stretching. Therefore, to avoid the court cases and all the humiliation associated with bankruptcy proceedings, an individual can seek a deed with their creditors. If they succeed to get the major creditors to sign up, they can be debt free in three years and still not go through bankruptcy.

 

Simple Repayment Model

Trust deeds enable an easier process of debt repayments. The individual only pays a single amount of money to their trustee who distributes the funds to the creditors. You, therefore, will not deal with the creditors directly. This helps in giving you peace of mind as you will not keep getting the threat calls and pressure from your creditors.

 

Discharge Leaves You Debt Free

The successful discharge of a deed leaves the individual debt free. The discharge will in most cases take three years.