Sequestration rates right up alongside death and divorce as one of the major sources of stress someone can experience. You spend months being treated badly by creditors in the run up to it, none of who are interested in helping you.

In fact, they seem to specialize in making you feel worse by piling on the pressure. You'll have spent hours researching sequestration, Trust Deeds and payment plans but still feel confused. You'll be at the mercy of emotions such as fear, anger and frustration, not to mention feeling powerless and resentful over the loss of control of your financial affairs and probably confidence too.

However, often at this point you find a sense of preservation and pride kicks in for many people. They don't WANT to be sequestered. Yes it wipes the slate clean, but it means giving up completely when they may feel that the situation can be rescued, that they can sort their financial problems out. A Trust Deed throws them a lifeline. But what are the advantages and disadvantages of a Trust Deed compared to sequestration. And wouldn't it just be better to swallow that pride and admit defeat?

Advantages of a Trust Deed

Creditors must leave you alone!

Once you're in a Protected Trust Deed your creditors can only communicate with your Insolvency Practitioner, thereby relieving a major source of stress for you. With sequestration however, your creditors will continue to be a major source of stress right up until you are sequestered and sometimes even afterwards in the hope of confusing you so you give them some money.

No stigma

Sequestration has always had a far greater stigma that a Trust Deed. Trust Deeds are difficult to find out about unless you tell someone, and in the remote possibility they ever do it is easily explained away as a form of debt or loan payment plan. Very few people will bat an eyelid.

Confidence and self-esteem

Sequestration can leave you feeling guilty and unhappy for many months afterwards and destroy your self-esteem. A Trust Deed on the other hand can help you build up your confidence and give you back a sense of power over your own financial affairs.

New financial management skills

A Trust Deed helps you to develop your budgeting skills and perfect the art of living within your means, giving you a firm foundation on which to build the rest of your financial future. With sequestration however, the debt may be gone but the underlying poor habits which led you to it have not been addressed and you run the risk of repeating past mistakes.

Can protect your career

A Trust Deed can help you preserve your career, especially if you hold a position of fiscal responsibility or public office. Both types of employment usually forbid employees from declaring sequestration. Trust Deeds allow you to carry on with your career relatively unscathed.

Disadvantages of a Trust Deed

As good as a Trust Deed sounds, there are some disadvantages to having one compared to sequestration.

Length of Trust Deed

Sequestration happens very quickly once the process is put into motion. This is not the case with a Trust Deed. You will be paying off part of your debts for three years, so any desire you have to start building your credit rating will be substantially delayed. With sequestration you could be debt-free within a couple of months – maybe even weeks - and spend the next few years building up your credit rating.

It affects your credit rating

For obvious reasons, your credit rating will be affected by a Trust Deed however this is also a disadvantage of sequestration. While a Trust Deed doesn't look good on your credit file, sequestration can look even worse in comparison.

You may have to sell your property

If you have any equity in your property, you will be required to release it – often at the beginning and sometimes at the end of the Trust Deed term - to pay your creditors a further lump sum. For many people, the only way to raise this lump sum is to sell their property. However family members are allowed to step in and offer to pay this lump sum on your behalf to ensure this does not happen. While this may sound bad, there is some flexibility with a Trust Deed whereas if you are sequestered you have very little and your home will certainly have to be sold to release the equity. Worse, if you are have no equity or are in negative equity and end up keeping the house, an Insolvency Practitioner has the power to order the sale of your home up to three years after your sequestration if your property's value rises.

Trust Deeds and sequestration are often viewed by many as the an ideal way to wipe the slate clean, for some people it is a matter of pride to make one last attempt to sort out their financial affairs. A Trust Deed is that one last attempt and for many it permanently solves their debt problems and puts them far along the path of financial and emotional recovery after years of immense strain and guilt.