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Trust deeds are considered as a convenient settlement of debts a debtor is no more able to pay off. The trust deeds are a method used in Scotland for easy clearance of debts. Usually elsewhere for lessening and time bound pay off of debts, debt management program is sought by the debt ridden person. But trust deeds are quite different from any debt management. While in debt management there is complete payment of the debts in a certain period and usually involves a fresh loan, in trust deeds the emphasis is on making an accepted debt clearing plan legally binding to the lenders.

Usually trust deeds are opted for when a debtor has come to worst financial situation where he can no longer pay for the clearing debts. In such a case the debtor usually files for bankruptcy. But trust deeds enables in avoiding bankruptcy. In other words trust deeds are a respectable alternative for bankruptcy.

Under trust deeds, the debtor makes a proposal to his creditors for paying off the debts in an agreed duration. But the preparing of the proposal requires a careful calculation of debtor's financial position. The proposal is sent to the creditors for their suggestion and on the base of various suggestions if any, the proposal is redrafted and is sent again to creditors. When the proposal is accepted and signed by the creditors, it becomes a trust deed and is legally binding on all creditors.

The advantage of trust deeds is that lenders can not impose any interest rate anymore on the debtor as the main aim of trust deed is to clear the debts and not to take interest. Another big advantage of trust deeds is that for clearing debts a certain duration which usually is of three years is agreed upon and after the duration if the debts are still remaining then rest of the debts are written off. This way actually, the debts are cleared easily and with lesser amount.

Trust deeds allow debtors a free of worry life as far as apprehensions of legal action from creditors are concerned. Creditors can not take a legal action against the debtor after they have signed the proposal. All the queries of creditors are handled by the licensed insolvency practitioner who assisted in forming trust deed. In fact it is necessary that trust deed is drafted with the assistance of licensed insolvency practitioner.

While drafting the proposal, licensed insolvency practitioner makes it sure that the amount of debts mentioned in the proposal is payable for the debtor. To do this, the practitioner ensures that after paying debts, the debtor still has enough amounts left for meeting routine expenses.

Trust deeds are done despite bad credit of the debtor. The borrower is not allowed to borrow money till the duration the debts are cleared. So there are no risks involved. Trust deeds can be rejected only by the creditors who hold 33 percent of total debts. But usually there is no rejection as main aim of creditors is to get back the loaned amount anyhow. Moreover a notice of rejection or objection has to be issued by the creditor within five weeks of getting the proposal. So if no objections are issued by the creditors, trust deed completes its term successfully.