How will a Scottish Trust Deed affect my property?

June 20, 2017

It’s natural to be concerned about the fate of your property when you’re struggling with debt. If you’re considering a Scottish trust deed, your home and other property may need to be included before the trust deed can receive ‘protected’ status.

An unprotected trust deed does not require the inclusion of property, but it does leave you exposed to the risk of sequestration if creditors discover that equity is available that could have been used to repay their debt.

Protected trust deeds and your home

Any equity in your home could be used by the Trustee in their calculations for repayment, along with deductions from your income, but this does not mean that you have to sell your home.

There may be other ways in which to raise the money needed, to minimise the long-term impact on you and your family. So how does the process work in practice if you do decide that a trust deed is the best option for you?

  • Control over your property passes to the Trustee
  • It is professionally valued, and a figure for equity arrived at by deducting the ‘redemption figure’ provided by your mortgage lender. This is the amount needed to repay the loan.
  • If you own the property jointly with someone else, it is usually the case that 50% of the equity is regarded as yours, but this would need to be corroborated at the time.
  • Under laws introduced in 2013, the figure for equity is established and put in writing before you sign the trust deed, so you know exactly where you stand financially throughout the process.

Prior to 2013, debtors were unaware of how much their liability would be in terms of equity until the end of the trust deed, when the Trustee could have their home re-valued if they wished.

Potential outcomes once the figure for equity has been established

As we mentioned earlier, it may not be necessary to sell your home in order to access equity in the property. Other options could include:

  • If it is a jointly-owned property, your spouse or partner may be able to remortgage in their name only, and pay the equity required by the trustee
  • Friends or family members making an investment in the property
  • Asking your partner to pay some of the equity, alongside the payments from your income
  • Prolonging the term of the trust deed, and either yourself or your partner repaying the equity in instalments
  • Considering a sale and rent back arrangement

As you can see there are a number of options, but sometimes people feel that it’s simply easier to sell their house and either downsize, or opt for a property they can rent.

When there isn’t much value in your property

The trustee will consider whether it’s worthwhile to include your home alongside other assets if there is little equity available – it may not be financially beneficial to incorporate equity of less than around £5,000 due to the costs of selling.

In this case, and when there is negative equity, the process of entering a trust deed may be less complex.

To find out more about Scottish trust deeds and property, call our experts at Scotland Debt Solutions. We specialise in helping Scottish residents escape the debt spiral, and can determine the best course of action for you. We have four offices across Scotland, and offer a free same-day meeting in complete confidence.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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