Is it possible to enter into a second Trust Deed?

July 6, 2017

Scottish Trust Deeds help eligible people in debt to repay as much as possible, with the remainder being written off at the end of the term – usually four years. Creditors vote on whether to accept the repayment arrangement, which becomes protected if they agree.

It is an effective way to repay your creditors without the need to enter sequestration, but what happens if your debts build up again further down the line? You are able to enter into more than one trust deed, but you must have been discharged from the first before you enter into a second arrangement.

Obtaining agreement from your creditors

Your creditors may be reluctant to agree a second trust deed, particularly if the discharge date was relatively recent. Your chances of success depend on factors individual to yourself, including the history of repayment during the first trust deed, how much debt was written off at the end, and your current level of debt.

Much depends on the insolvency practitioner appointed to help you – for example, how much practical experience they have of negotiating with creditors under these circumstances.

If the Trustee can persuade creditors in your favour, and provide sufficient evidence that you are able to meet the monthly repayments, a second trust deed will operate in the same way as the first.

How your Trustee can help

Your Trustee’s powers of persuasion and negotiating expertise may dictate the outcome of your application for a second trust deed. Initially, they will assess your financial situation to ensure that a trust deed is going to be the best option, rather than the Debt Arrangement Scheme, for example, or sequestration.

Ultimately, your creditors need to judge whether they will receive more money if you enter a trust deed than they would if you were sequestrated, and this case is put forward to them in a formal proposal.

In order to prepare this the Trustee will need to know why your debts have become unmanageable again – you may have recently been made redundant, for instance, or have suffered a long-term illness that reduced your ability to earn an income for a while.

Other considerations for the Trustee and your creditors

When deciding whether to recommend you for a second trust deed, the Trustee will take other factors into consideration, such as if there were problems during the first trust deed.

If your previous trust deed failed, it may have been for reasons outside your control, but these aspects will also be a factor when creditors vote.

If the term of your first trust deed has not yet ended, you will not be able to enter into a second arrangement.

Our experts at Scotland Debt Solutions will offer help and support if you are struggling with debt. We can establish your current financial situation, identify your best options, and provide the professional support you need at this stressful time. Call one of the team for an initial meeting free-of-charge – we work from four offices around Scotland.