A trust deed is a legally binding agreement between an individual and his or her creditors in which case the assets of the individual are transferred to a trustee who seeks to manage the assets in a way as to seek repayment of the outstanding debts owed by the individual. The agreement is voluntary and creditors may choose not to sign up for the agreement In such a case, the creditors who choose not to sign for the trustee can continue seeking alternative means of recovering their debt. On the other hand, the creditors who sign up for the agreement are bound to the terms of the agreement and cannot seek alternative debt recovery means. There are different types of trust deeds. These types of deeds are discussed below.
A general trust deed also referred to a regular trust deed is the deed that is taken by creditors in a voluntary basis. In this case, the individual appoints a trustee who needs to be a qualified insolvency practitioner. He or she then transfers all assets under his or her name to the trustee who manages the assets on behalf of the creditors. The trustee then writes to the creditors seeking them to sign up for the trust deed. The creditors weigh their options and may choose to sign or not to sign the agreement. If they sign the agreement, they are bound by the terms and they deal with the trustee from there henceforth. The trustee then continues to discharge the trust as per the agreement until the agreement if fully discharged. Once this is done, the individual is debt free. The regular deed enables an individual who is unable to repay their debt an opportunity to resolve debt without going through the humiliating process of a bankruptcy.
Protected trust deeds are enforced by a court of law. In this case, an individual seeks the intervention of the court to bind all his or her creditors to the deeds. The court determines the trustee and supervises the agreement before discharging the deeds. The creditors are notified of the intent to have a protected deed and they have a period of 5 weeks to object to the deed. If a majority of the creditors do not object to the deed, the deed comes to play and all creditors are bound by the agreement. On the other hand, if a majority of the creditors object to the trust deed, one can use such objection grounds to get their own sequestration. A protected deed also protects the home equity of the individual and the creditors and trustee is also limited as to the extend that they can seek debt recovery. Once again, if the deed is discharged as per agreement, the individual is debt free.
Asset Free Deed
An asset free deed is taken by an individual who does not have any assets. In this case, the trustee receives portion of the income from the individual and makes the payments to the creditors. An asset free deed helps an individual who may not have nay assets to their name to still take advantage of trust deeds to avoid bankruptcy.