Trust Deed – What You Need To Know

Trust Deed – What You Need To Know

If you are in serious debt, you may find it difficult to see a way out. Perhaps you do not know whether you can afford to raise money to pay back what you owe. If you are in this situation, a trust deed can help to ease the strain.  Many Scottish residents have chosen trust deeds as their preferred debt solution.  In this article, we will discuss all that you need to know about a Trust Deed.

What exactly is a Trust Deed?

A trust deed is a form of insolvency. It is a legally binding contract between you and your lender. In this agreement, you are allowed to use your income and assets to pay back what you can possibly afford, usually over a period of 4 years.

It is important to note that you can only qualify for a trust deed, if you are a Scottish resident. If you are currently living in England, Wales or Northern Ireland, consider applying for an Individual Voluntary Arrangement (IVA), which works just like a Scottish trust deed.

When compared to bankruptcy, trust deeds are less formal. Additionally, they help you avoid the many legal restrictions that follow after one is declared bankrupt. A trust deed is also recorded in the Register of Insolvencies as a protected trust deed.

Once it is labelled a “Protected Trust Deed”, your creditors cannot take any legal actions against you to recover their money. During the term of a trust deed, any interest or fees on your debts are frozen at the date of commencement. At the end of the arrangement, any remaining debts are written off so you can begin your life afresh.

When compared to other debt solutions, a trust deed allows you to have a greater control over your assets, including your vehicles. However, some of your properties may be transferred to a trustee so they can be sold raise money to repay what you owe. You are also required to make a contribution from your monthly income.

How Do I Know I am Eligible for a Scottish Trust Deed?

To know if you are qualified for a Scottish trust deed, you must meet the following criteria:

• You must be currently living in or have lived in Scotland with the last 12 months or have had a place of business in Scotland.
• Your unsecured debts must total up to £5,000 or more.
• You must have sufficient income to help you pay the agreed monthly contribution and/ or have realisable assets that can be sold to raise money to pay your debts.
• You must be insolvent, which means you cannot manage to pay back your debts as they fall due or your liabilities are greater than your assets.

Debt Solutions We Offer

We offer debt solutions to UK residents who are looking to take back control off their finances, we firstly assist you by finding out more about your current situation before recommending to you the most appropriate debt solution for your circumstances.

You must reside in the UK for us to assist you.

Benefits Of Our Debt Solutions

What Debts can I Include in a Trust Deed?

You can include all your unsecured debts in your trust deed. Some of the common debts most debtors include:

• Personal loans
• Personal guarantees, if crystallised
• Shortfall on mortgage or car HP, following repossession
• Outstanding car parking charges
• CSA arrears (you must pay on-going maintenance)
• Rent arrears (Note that this may be an issue if are still living in the property)
• Over payment of DWP benefits
• HMRC debts, including Pay As You Earn (PAYE), NIC and VAT
• Council tax arrears
• Payday loans
• Store cards and catalogues
• Overdrafts and many more

Can I Obtain More Credit After Being Granted a Trust Deed?

After your Trust Deed is accepted, you bound by its terms. First, you will be required to make the agreed monthly contribution for the period of time your trust deed is valid, usually 48 months. In addition, you will NOT be permitted to take out more loans until this period has elapsed. After 48 months are over, you will be discharged from all the unsecured debts included in the trusted. This means you will become debt free and you can start rebuilding your financial life again.

However, it is essential to note that being granted a Trust Deed is an admission of Apparent Insolvency. Thus, a trust deed will negatively affect your credit rating and consequently your ability to obtain credit in the future. It is also important to note that you may not be able to obtain credit immediately after you are discharged from your Trust Deed and if lenders choose to give you credit, they will charge you more. The decision to give you credit and the charges made for it is largely determined by the policies of the individual lender.

What are the Pros and Cons of a Trust Deed?

Pros of a Trust Deed

• Once a deed becomes protected, creditors cannot take legal action against you to recovery any outstanding debts.
• You do not have to deal with creditors. Our debt experts will negotiate with them on your behalf.
• All interest and fees on your debts on your outstanding debts are frozen once your trust deed becomes protected.
• You can be allowed to keep your home and other assets, however be sure to speak with your insolvency practitioner prior to signing your deed.
• You are allowed to make one affordable monthly payment, which is calculated after an allowance has been made for all your basic expenses and household bills.
• You will only be required to make payments towards your deed for a period of 4 years, after the expiry of this period, you will be discharged from the trust deed and all the remaining debts are written off.
• There are no court proceedings

Cons of a Trust Deed

• Your credit rating is affected negatively
• Creditors can reject your trust deed proposal making it to fail to achieve a protected status
• Your current employment or future employment prospect can be affected by entering into a trust deed

These are just some of the most important things you need to know before you enter into a trust deed. If you need any assistance getting into a trust deed, do not hesitate to contact us.