At Debt Support Trust we want to ensure you have all of the information you need to make a decision on your debt problem. A Trust Deed can sound like a fantastic route to become debt free. “Write off your debt”, “Repay 60% of your debt” and ” Get a Government backed debt solution” are all expressions you may hear on TV or in the newspaper adverts. Some of these could be accurate but only in certain circumstances. For this reason, it’s important to know the truth about Trust Deeds and how your Trust Deed could differ from somebody else.
Or, call 0800 085 0226 for advice from a friendly money advisor.
Are Trust Deed’s As Good As They Sound?
Thousands of people enter a Protected Trust Deed every year to resolve their money problems. These are well used and legally binding debt solutions, and they protect you from further action being taken by your creditors. They have pitfalls too, which we’ll discuss. These negatives are not to worry you but to ensure you have all the information you need to make a positive decision about your financial future.
A Trust Deed enables you to put an offer of repayment to your creditors over a fixed period of time, usually 4 years. This repayment plan offers what you can reasonably afford per month, plus any assets you have. A Trust Deed protects your house, however, if you have a high percentage of equity in your house then you could be asked to remortgage to release this equity. You can also release the money via a third party (friend/ family member etc) offering to pay the money for you.
In a Trust Deed you usually only repay a percentage of the debt you owed. For example, if you owe
So, What Are The Negatives of a Trust Deed in Scotland
There are negatives of any debt solution. In this instance you should be aware of the following:
- Credit Rating: Your credit score will likely reduce on entering any debt solution because you are failing to maintain your contractual agreement. The default which is added by the creditor lasts for 6 years from the date it’s added.
- Assets: Your assets will be valued in the Trust Deed (usually only cars, share / stocks/ bonds and house) and you could be asked to release any equity from these. Every case is different and valuations on assets are done prudently.
- House: You must continue to make payments on your secure loans, such as a house, while in the Scottish debt solution.
- Failure to pay: If you fail to complete your debt solution then the debt could be returned to you, along with interest and charges. You could also be made bankrupt.
- Interest and Charges: Any interest and charges will be written off at the end of the solution, however while still in the plan the interest and charges could still increase. It’s only on completion of the plan that the remaining debt, interest and charges are written off.
- Inheritance: If you come into money or inherit from a family member during the period of the Trust Deed then you will be asked to pay this into your debt solution. If this repays the full amount of debt and the fees for the solution then any remaining money will be returned to you.
- Fees: Every Insolvency Practitioner will charge fees and this is agreement between you, the company administering your solution and the creditors. The fees usually come out from your monthly payments and whatever is left is split among your creditors. The only problem is when you inherit money or plan to repay 100% of the money you borrowed, as you could be liable for the Insolvency Practitioner fees too. If at the outset you think you’ll repay 100% of the debt in 4 years then consider a Debt Arrangement Scheme as this solution would be more suitable.
- Register: Your name goes onto the Trust Deed register with the AiB (Accountant in Bankruptcy). This register can be searched but it’s unusual for somebody to do this.
- Employment: If your employment contract restricts you from entering a Trust Deed then you could lose your job. If it’s not in your contract of employment then it’s perfectly fine to enter the solution.
There are positive and negatives to all debt solutions, so you can read the positives of Trust Deeds here.
Should I Do A Trust Deed?
Before you enter any debt solution get all of your options from our helpful charity debt advice team. We provide advice on all Scottish debt solutions including the pros and cons of every option you are applicable for. This ensures you can make an open decision on your finances.
You can call Debt Support Trust on 0800 085 0226 or complete the debt analyser below.