Important: a Trust Deed is for Scottish residents only. You will need a different debt solution if you are an English or Welsh resident.
Are you under the burden of never-ending debt and struggling to see a way out? You could get expert advice or help using a debt solution known as a debt Scotland Trust Deed. Using this mymoneyoffice article, you will learn how you could use a Trust Deed to eliminate all your debts across a four year period. Let’s dig in.
Understanding the process of trust deed
A Trust Deed is a form of personal insolvency, it is a legal contract between you and your creditors for usually up to four years. A Trust Deed is for Scottish residents only. Trust Deeds were made as an alternative debt solution to bankruptcy. Many people find themselves in financial trouble after being unable to repay debts. For such people, a Trust Deed works like a manageable plan to pay off their debts in a limited but manageable time.
The terms of the Trust Deed are designed in such a way that it considers all circumstances of the debtor so that it might not create further trouble for your finances and budgeting. A Trust Deed will also satisfy creditors’ requirements. Therefore, it is mutually beneficial for both parties to agree on and fulfil the contract.
How does a trust deed operate?
A debt Scotland Trust Deed lasts for four years. A Trust Deed will be regulated by the help of a trustee (insolvency practitioner). If you are looking into a Trust Deed it is very important to make sure that the trustee is a completely licenced insolvency practitioner, always check this.
If you stick to your four-year repayment plan, you could write off your debts after the term. The remaining debt will be paid off by following all terms and conditions.
As the contract is legally regulated, your creditors won’t be able to contact you regarding your debts. This is a huge benefit of using a Trust Deed when in debt; receiving annoying calls and messages can cause a lot of unwanted stress / anxiety.
A Trust Deed assures creditors that debt will be paid off in a certain period (this is typically 4 years). It will give clarity to both you, the debtor and also the creditors you owe money to. With that clarity, your creditors should be content with the monthly payment you make to them and therefore will be more willing to cooperate.
What debts can and can’t be included in a debt Scotland Trust Deed?
– Credit cards
– Store Cards
– Personal Loans
– Payday Loans
Any secured debts will not be allowed to form part of a Trust Deed. This means you will need to budget to continue payment to these types of debts if you are to enter a Trust Deed.
Types of secured debts:
– Hire Purchase Agreements
Other types of debts which cannot be included:
– Student Loans
– Court-ordered Fines / penalties
– Obligation to pay child support
How does a Trust Deed affect my credit rating?
Entering a Trust Deed while residing in Scotland will harm your credit rating. Because of this it might become more difficult to borrow money in the future. However, if you are already in financial trouble, it’s quite likely your credit rating has already been affected. Therefore, the most important thing to do is get out of the current financial situation you are in, your credit score will build back over time. A Trust Deed is your chance to regain financial stability. It acts as an agreement to meet your obligations and move forward. After four years, your credit rating will be hit, but at least you have paid off your debt.
Will I lose my home during the trust deed?
While drawing up the trust deed, the trustee will usually take control of your assets. This is done to recognise the level of equity you have in your possession.
Equity is the difference between the value of your property and how much you owe on the mortgage (or secured property loan).
If your only asset is your home, the equity will refer to the difference between your property’s worth and the debt.
The trustee usually figures out the value of your asset at the start of the Trust Deed. Your property value will be fixed at the start of the agreement so if the value increases over four years your equity position within the property will remain the same.
If there’s a chance of you losing your home, then a trust deed won’t be recommended to you. As all financial advisors advise, avoid such circumstances.
If you own assets other than your home, you will be advised to put them at risk first. In this way, your house will be excluded from the Trust Deed. Your trustee always prioritises not putting your home at risk. In most situations, the loss of the homes of the debtor does not occur.
What happens if my circumstances change during the four years?
You can experience changes, specifically financial changes, over four years. It includes receiving an inheritance, changing working hours, a pay rise or a promotion. They are positive changes. However, things go in opposite directions as well. But whether the circumstances go right or wrong, inform your trustee first.
What if I don’t keep up with my trust deed?
The crucial point for debtors under these circumstances is to realise that failing to keep up with the terms of a Trust Deed without good reason could be serious.
A trust deed is a legally binding agreement. Thus, you must do all possible to keep up with the agreed monthly repayment amounts.
You must inform your appointed trustee as soon as possible, for any reason, you become unfit to satisfy the deed’s terms. Where necessary circumstances mean you cannot make payments as agreed, there are ways to keep the deed terms complete. But only where licit reasons can be demonstrated.
If you fail to meet the payments within a Trust Deed it could be that you begin to look at bankruptcy as a potential debt solution.
Debt Scotland Trust Deed is a reliable option if you face financial instability and want to avoid bankruptcy.
However, understand all terms and conditions before entering into one. Speak with a professional debt advisor for a more broad scope of debt solution and trustee if you believe a Trust Deed is the right for solution for you. Be sure to check mymoneyoffice’s solution finder to get more information on the different types of debt solutions.