Important: a Trust Deed is for Scottish residents only. You will need a different debt solution if you are an English or Welsh resident.
It is a challenging task to get your personal finances under control when you are dealing with debt. With overwhelming debt it’s quite common to get your head down and think of debt as a never-ending burden, but this does not have to be the case. If you are currently underwater with financial debt, you could look at reliable debt solution options like a Trust Deed.
Don’t know what a trust deed is? This blog provides a complete description of a Trust Deed and how it could be helpful to your situation.
What is a Trust Deed?
A trust deed is a voluntary contract between you and your creditors (the people you owe money to.
Trust deeds include the repayment of debts at a specific time, you and your creditors will make arrangements by agreeing to the terms mutually. Once you agree to these terms, you will start repaying the money monthly and after time, all your debts will be paid off.
In simple words, a Trust Deed is a systematic way to repay the money you owe over a period of time. If you were to set up a Trust Deed after the 28th November 2013, your Trust Deed will last for four years. Once this period is finished you will no longer be liable to your debts. This is called being ‘discharged’
The Trust Deed process is far less formal than ‘bankruptcy’, as a result you can avoid some of the stricter financial restrictions.
However, a trust deed may require some of your assets to be passed to a ‘trustee’ in order to raise capital to pay back some of your debt.
Providing certain conditions are met, the Trust Deed may be recorded in the ‘register of insolvencies’ as a ‘protected trust deed’. This will stop your creditors to stop contacting your after the period of a Trust Deed.
The record is taken in the register of insolvencies as the ‘protected trust deed.’ It acts as an affirmation for you that the creditor will no longer be able to take further action.
You should understand all terms and conditions before signing a trust deed. It is important to know if there are any hidden charges or extra expenses. Settling such things helps you to carefully deal with debt management plans. Seek professional help for further assistance.
Who is a trustee and how much does it cost to use their service?
A trustee is a person who is an authorised insolvency practitioner (IP).
A trustee will help you in setting up the time period with your creditor and managing other problems related to it.
Usually, they charge £4,000 or more depending upon the services they offer. Every month, you pay their fees in terms of recurring payments. However, keep in mind that a trustee can’t charge you before establishing the trust deed.
Advantages of a Trust deed
– Once the terms of a trust deed are agreed all interest is frozen on your debts.
– You will still have access to a bank account within a Trust deed. However, you will not have access to a cheque book or credit card overdraft.
– You can continue in employment (although we do recommend checking your contract of employment before initiating a Trust Deed).
– In some circumstances, it is possible to initiate a Trust Deed without your home being at risk.
– Monthly payments are flexible if your financial situation changes.
Disadvantages of a Trust Deed
– Only the creditors that agree to the terms of the agreement are bound to the terms. This is unless the Trust Deed becomes ‘protected’.
– You are not protected from bankruptcy in a Trust Deed, you have to keep making the agreed payments.
– You cannot continue as a director of a company unless your trustee and the rules of the Trust Deed agree.
– Yoru credit reference score will be affected. This can make it more difficult to get additional credit during or after the Trust Deed has ended.
– A Trust Deed will not include certain debts. Check what debts can be included in the following section:
Which debts can not be included in a Trust Deed?
Are you considering a trust deed to manage your debts? Unfortunately, there are some debts you can’t include:
· Debts acquired through fraud.
· Student loans
· Ex-spouse support payments ordered by the court.
· Court-issued fines, penalties, restitution, or forfeiture orders
· Debts owed to a creditor which is secured by an asset you own.
Can I apply for a trust deed?
To apply for the trust deed, you need a minimum of £5,000 of debt. To refer to a trustee, you require:
- Minimum £8,000 of debt
- More than one type of debt
- A surplus household income of £150 per month to pay to trust deed
- You must have the ability to pay back a minimum of 10 p for every £1 you owe to your creditors.
It’s very important to understand the full terms and conditions of the trust deed and choose a reliable option for yourself. However, if you are still unsure of your best financial options, help is always available. mymoneyoffice can offer the necessary advice regarding your debt management. Use our free solution finder to speak to a specialist debt advisor today.