A Trust Deed is a voluntary, but legally binding agreement between you and your creditors. A Trust Deed allows you to make affordable monthly payments towards your debt over a typical term of four years, allowing you to repay all or part of what you owe. A Trust Deed is supervised by a Licenced Insolvency Practitioner, also referred to as a Trustee. A Trust Deed is available for Scottish residents only, a minimum of six months residence in Scotland is required. Trust Deeds are an alternative option to Bankruptcy, or Sequestration as it is also known as in Scotland.
SO WHAT ARE THE ADVANTAGES OF A TRUST DEED?
- Potentially a percentage of debt written off
- Interest & Charges frozen
- Easier budgeting and income management
- All creditors are treated fairly
- Timescale for becoming debt free
- Experienced support
* A Trust Deed does not cover priority bills or some types of debt. See ‘What is a Trust Deed’ for information on what you can include
WHAT ARE THE DISADVANTAGES OF A TRUST DEED?
- There are restrictions on the type and level of personal expenditure allowed with a Trust Deed.
- Homeowners will be expected to attempt to release equity from the property, and this may attract higher interest rates or be asked to pay into the Trust Deed for an additional 12 months.
- If you do not adhere to the payment terms of your Trust Deed you could be at risk of Bankruptcy / Sequestration and creditor correspondence will resume
- By law, details of you having entered a Trust Deed will be registered on the Public Register of Insolvencies.
- Your credit rating will be affected for six years from the date of your Trust Deed approval. You should not apply or take our any credit during the term and should consult your IP / Trustee for advice if you needed funds, for example, a household item needed replacing.
- If you are a homeowner you will be expected to release equity to cover some or all of the debt being discharged / written off
- Stopping contractual payments to your creditors, in order to access this debt solution, could cause your creditors to apply interest and charges to the debt and is likely to trigger contact from them via the contact mediums you have agreed with them. We strongly advise you not to ignore contact as you could miss vital information. We can assist you with it as part of our service.
Debts which can be included within a Debt Management Programme include:
- Credit Cards
- Unsecured Loans
- Payday Loans
- HP Agreements / Finance (in some circumstances)
- Disconnected Utilities
- Council Tax Arrears (in some circumstances)
- Benefit Overpayments (in some circumstances)
- Mortgage Shortfall
- Debt with legal action pending (in some circumstances)
- Old business debt (in some circumstances)
It remains your responsibility to make payments to priority commitments outside of your Trust Deed, for example; your mortgage / rent, secured loans, vehicle Hire Purchase, current and future council tax, HMRC debt and taxes, child support and fines. Failure to pay these could lead to repossession, loss of access or use of essential goods or services or even imprisonment.
If you are in arrears, or are concerned about your ability to pay commitments like these, GW may be able to offer advice and make suggestions to ensure you get back on your feet with priority expenses, if we can’t help you, we will point you in the right direction.
- What is a ‘Protected Trust Deed’ and why is this different to a ‘Trust Deed’? A Trust Deed becomes a ‘Protected Trust Deed’ when a sufficient number of creditors agree to its terms; this means that provided you comply with the terms of your Protected Trust Deed, your creditors are prevented from taking any further legal action against you.
- Do I pay any fees or charges for a Trust Deed? Whilst GW does not charge a fee for packaging and preparing your case for the Insolvency Practitioner / Trustee; there are fees charged by the Insolvency Practitioner / Trustee for their services. These are built in to, and deducted from, the payments made in to the Trust Deed. These fees will be outlined by the Trustee once they have assessed your case. See the below case study for an example of our fees for a previous client of ours.
- What happens if my creditors don’t accept the Trust Deed? Despite best efforts and advice, sometimes creditors do not agree to the Trust Deed. Where this happens, the Trustee will assess your suitability for solutions available to Scottish residents, or look to us to arrange a Debt Management plan, with a view to try for a Trust Deed again in a few months – if this remains best advice for you. More often than not, an alternative solution is available for you.
- What happens if my circumstances change during the Trust Deed? Advise your Insolvency Practitioner / Trustee straight away. There will be certain flexibilities within the agreement for common or anticipated changes; these will be specific to your individual circumstances.
- How much of my debt will be discharged / written off? Each case is different, dependant on how much you owe, what you can afford to repay, what assets you might have, and how your circumstances change throughout the Trust Deed – for example, if you have a cash windfall you may be expected to pay some or all of this in to the Trust Deed.
- A friendly and non-judgemental Personal Finance Advisor will look to complete a detailed telephone assessment of your personal financial circumstances – we call it a ‘Personal Consultation’
- The Personal Finance Advisor will assess what solutions are available and suitable and together you will discuss your options and agree the best route to addressing your finances.
- If a Trust Deed appears to be the most suitable debt solution for your current circumstances then your Personal Finance Advisor would discuss how it would work for your circumstances and then send you a copy of all discussed for you to read, following the telephone call.
- After reviewing paperwork and taking your time in making a decision, if you chose to use GW to explore the Trust Deed further then you would need to return certain documents.
- These can be collected from you via a courier – don’t worry – that’s at no cost to you!
- Your Personal Finance Advisor would check your paperwork and make sure a Trust Deed remains the better suited solution before transferring your documentation to the Insolvency Practice for the Trustee / Insolvency Practitioner to begin work on your behalf.
- If at any stage before approval, it becomes apparent that the Trust Deed is not the best advice you will be notified and will come back through to your Personal Finance Advisor at GW where alternative solutions will be explored and discussed.
- If your Trust Deed proposal is successful then you will be looked after by the Trustee / Insolvency Practitioner and their team for the duration of your Trust Deed.
Account information such as payment history, including reduced, late, or missed payments, is collected by the Credit Reference Agencies until the account is closed and then held on a consumers credit record for a further six years. It may also be requested by potential employers.
For further information on dealing with debt please consult the In Debt? Dealing with your creditors guide to dealing with creditors.
For free information and advice we recommend you visit moneyadviceservice.org.uk for more information on financial and debt difficulties.