Important: a Trust Deed is for Scottish residents only. You will need a different debt solution if you are an English or Welsh resident.
For Scotland residents, a protected trust deed is a reliable debt solution. It is a way to simplify debt management.
If you are worried about how to repay your debt in a specific time, a Protected Trust Deed could be for you. With mymoneyoffice, you can get an insight into the important aspects of Protected Trust Deed and how they are beneficial. Let’s dig in.
What is a protected trust deed?
A Protected Trust Deed is a legal contract between you and your creditor over a four year period. It is set up to help you to repay your existing debts. When the contract ends, it is possible for all your unsecured debts to be written off.
A Protect Trust Deed is a form of insolvency that means your unsecured debts will need to outweigh the worth of your assets, like houses or any vehicle you own. Things such as credit card debt, personal loans, and store cards are all examples of unsecured debts too.
If you are considering a Protected Trust Deed as an option to manage your debt, first consult professional advice. An insolvency practitioner (IP) will help guide you through the journey and help you understand the various steps involved.
How is a protected trust deed helpful?
The Protected Trust Deed can help you in the following ways:
- With an IP, you can manage all your debts across a four year period. After four years, it’s possible for the remaining debts to be written off.
- Once your Trust Deed gets approved, creditors are obliged to stop chasing you. This means you can get peace of mind knowing that people contacting you are not doing so for money.
- Unlike bankruptcy, you can keep one vehicle, this is assuming the vehicle is estimated to be worth less than £3,000.
- Although a Protected Trust Deed is a formal debt solution, there’s no need to appear in court.
- It is a formal debt management contract which adds reliability and credibility.
Risks associated with a protected trust deed?
A protected trust deed also comes with several risks:
- In order to set up a Protected Trust Deed you have to pay the insolvency practitioner in addition to your monthly repayment. This fee will be paid in monthly instalments and only when the Protected Trust Deed is initiated. If the agreement does not start you will not be charged.
- A Protected Trust Deed could influence the term of your employment. We recommend consulting your HR department to find out if your employment could be affected.
- If the trust deed fails for example, if multiple payments are missed – there is still a risk of bankruptcy.
- Your credit card rating will be affected for the next six years. This may make it more difficult to get credit in the future.
Things to consider while choosing a protected trust deed
- A Protected Trust Deed is a legal agreement between you and your creditors. It’s your chance to regain financial stability without facing more severe repercussions from creditors if you fail to pay your debt.
- If you follow the terms of your Protected Trust Deed, your creditors won’t be able to take additional actions against you. Nor can they bankrupt you.
- A Protected Trust Deed could affect your employment.
- If living in a rental property a Protected Trust Deed could cause your landlord to terminate the tenancy agreement.
- If you own property you may have to relieve equity in order to pay back some debt.
- Any changes to personal finances must be relayed to your Trustee (insolvency practitioner).
- Moreover, you will find trouble in renting any property you own. As there will be further complexities in the tenancy agreement.
Understanding the Impact of a Trust Deed on Your Financial Situation
Are you considering a trust deed to manage your debts? Remember that you’ll need to stick to a budget for the entire four-year term. If you fail to keep up with the repayment you could expose yourself to bankruptcy.
It’s important to note that your details will be added to the public register for five years. The register is called the ‘Register of Insolvencies’ (ROI). The register is audited by the Accountant in Bankruptcy (AiB) and is available in the public domain, so be prepared for that level of transparency.
There will be spending restrictions during the period of your Trust Deed, so careful budgeting is crucial to make sure the monthly payments are met.
While there is a fee for the services of an insolvency practitioner (£4000). It’s deducted from the trust deed fund which includes your monthly payments and any assets or equity. You will not have to pay this in one lump sum.
Keep these factors in mind as you decide if a trust deed is right for you.
Alternative solutions
Still, worrying about your finances and not quite sure whether a Protect trust deed is for you? A protected trust deed can be a reliable option but there are still other options available. Potentially some that can also offer you easy debt management but tailored better for your financial situation. For our Scotland residents, there are some exclusive options too! Check them out:
- Debt Payment Programme (DPP)
- Debt Management Plan (DMP)
- Sequestration
- Minimal Asset Process Bankruptcy (MAP)
There’s always professional guidance available for you. So, do not stress out about what to choose. You can also do your own research with internet resources like those found here on mymoneyoffice. We suggest researching and learning the pros and cons of each of them.
Conclusion
The above information should help you understand whether a protected trust deed is the right choice for you. Always keep in mind that professional help is always available. So, do not consider yourself alone for any second. mymoneyoffice can offer the necessary advice regarding your debt management. Use our free solution finder to speak to a specialist debt advisor today.
