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What Are Trust Deeds?

What Is A Trust Deed?

What Are Trust Deeds? - Advice

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What Is a Trust Deed In Scotland?

Only available to residents of Scotland, a Trust Deed is a legally binding, formal debt solution.

Trust Deeds are designed for people who are struggling with debts of £5,000 or over.

 

If you are a resident of England, Wales or Northern Ireland, then an IVA (Individual Voluntary Arrangement) is a similar solution, but it is important to note there are differences to the benefits, downsides and fees

 

To find out more about IVAs and other non-Scottish debt solutions, visit out sister site IVA4Me.co.uk

 

A Trust Deed is an arrangement between you and an Insolvency Practitioner (IP) whereby your debt is reduced into one affordable monthly payment. An IP is a qualified professional, licenced to act on your behalf in the role of a ‘Trustee’.  

 

Once your Trust Deed arrangement has been agreed and set up, your creditors can no longer take action against you and won’t be able to contact you, but the Trust Deed will affect your credit rating for six years, making it difficult to get further credit during this period. Your details will also be placed on The Register of Insolvencies, which is a public record, while you clear your debts. 

 

For the duration of your Trust Deed, usually four years, all fees and interest relating to your debt is frozen and once completed, the remainder of your debt is written off, allowing you to begin again, debt free. 

How Long Does A Trust Deed Last?

A Trust Deed term will typically last 48 months; 4 years. During this time, you will make a monthly payment payment to your Trustee. This payment is divided up into pieces. Some pieces are sent to your creditors to pay towards your debt. Others are used to cover the fees related to the administration of the Trust Deed.

 

Whilst 4 years is the usual time period for a Protected Trust Deed term, there are circumstances where this period could be extended by a further 12 months. 

 

Two examples of this could be:

 

  • If you have equity in your home, your Trustee will expect this to be released and used as a contribution towards your debt. Sometimes, depending on whether you are locked into a fixed interest rate, you may need to wait until the fifth year to release this equity.

  • If you have missed any of your Trust Deed repayments, then these will be added onto the end of the agreement, thus extending the overall Trust Deed period of time.

What Is The Difference Between a Trust Deed and a Protected Trust Deed?

With a Trust Deed, only those creditors that agree to the terms of the proposal are bound by it. As such, those creditors who do not agree to the terms of the Trust Deed, could still take action against you.

 

If any of your creditors have taken legal action against you, then they may have begun the process of ‘diligence’. Diligence is action whereby your creditor is seeking to be able to reclaim your debt through several methods. These could be:

 

  • Wage Arrestment
  • Bank Arrestment
  • Attachment of Goods Order (Seizing your property)

If your Trust Deed is not protected, you can apply for any diligence to be put on hold for 6 months allowing your to apply to have your Trust Deed protected.

 

If your Trust Deed is protected, then no New diligence can be started. 

How Does A Trust Deed Become Protected?

To apply for your Trust Deed to become protected, you Trustee will write to your creditors advising them that your Trust Deed is to become protected. 

 

Unless there are any objections to this, the Trust Deed will take on ‘Protected’ status. 

 

Creditors who fail to reply are treated as though they have agreed. In order for the application to fail, at least half of the creditors need to object or creditors who hold at least one third of the overall debt must object. 

 

If your Trust Deed obtains protected status, then the debts will be frozen, meaning no interest or charges can be added to the arrears unless the Trust Deed fails as a result of you missing repayments.

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Do I Qualify for a Trust Deed?

In order to qualify for a Trust Deed debt arrangement, you must meet the following criteria: 

 

  • Be a resident of Scotland, now or in the last 12 months 

  • Have unsecured debts of at least £5,000 

  • Have sufficient income to pay a monthly contribution. The Trust Deed should allow for at least 10% of your debt to be repaid 

  • Be unable to pay your debts since the value of your credit is greater than that of your assets 

Can A Trust Deed Affect My Job?

If you have a job in the financial sector, legal profession, or where you are responsible for budgets etc. then having a Trust Deed may affect your employment and could result in disciplinary action.

 

If you have any doubts concerning your job, then we advise you to contact your HR department and discuss this with them before you apply for your Trust Deed. 

What Happens If I Miss Trust Deed Payments

When entering into a Trust Deed, it is important not to miss your repayments. 

 

If you miss a couple of payments here and there then these will often be added to the end of your agreement, extending the overall length of the Trust Deed. However, if you continue to miss repayments, then you are putting your self at risk of having the Trust Deed fail.

 

If the Trust Deed fails, then your creditors could petition for you to be forced into sequestration (bankruptcy). Alternatively, depending on your personal circumstances, you could be at risk of having your wages arrested, or your bank account arrested.

What Happens After a Trust Deed Agreement Has Finished?

Once your Trust Deed has completed, you will be sent a letter of discharge from your Trustee. 

 

When you are discharged from the Trust Deed, you are also discharged from any Debt that was included in the Trust Deed, that still has an outstanding balance. This means that your creditors will write the debt off. 

 

The Accountant in Bankruptcy (AiB) will also be notified of your discharge from the Trust Deed and they will update their public records accordingly.

 

You are now able to get on with the rest of your life debt free. You are also able to begin the recovery process of your credit rating.

 

It may take some time now for your credit rating to recover – it normally stays on your credit file for 6 years from the start date of the agreement – but technically, you can begin applying for credit such as a credit card. Doing so can help to begin repairing your credit rating.

Who Can Help Me With My Debt?

If you are struggling with your debt and live in Scotland, then there are several options that may suit your circumstances. Contact us at TrustDeed4Me to find out how you could become debt free. 

Trust Deed Guides and Information

What Is A Trust Deed?

What Are Trust Deeds?

Only available to residents of Scotland, a Trust Deed is a legally binding, formal debt solution. It is designed for people who are struggling with debts of £5,000 or over.

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Whether a Trust Deed is right for you or not will largely depend on your personal situation e.g. debt level, number of creditors, affordability etc.

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Setting up a Trust Deed does incur some costs; however, you will not be expected to pay anything up front at the beginning of the arrangement and there will be no surprise costs at the end of the arrangement.

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How Does A Trust Deed Work?

A Trust Deed is a debt solution where you agree with your creditors to pay all or part of your debts. This agreement is set up and managed by a Trustee, who will receive an agreed monthly payment from you and will divide it amongst your creditors.

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Signing up to a debt solution is a significant event in your life, so it is important to gather as much information as possible, so you can make an informed decision.

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Like things in life, Trust Deeds carry with with them benefits and things to consider. Take a look at our article to find out whether a Trust Deed is right for you.

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The main purpose of a Trust Deed is to take all of your unsecured debt, calculate how much of it can be paid within a 4 year period at an affordable rate and write off the remaining balance. Leaving you debt free.

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