How long does a trust deed last in Scotland?
September 25, 2017
Scottish trust deeds offer a way out from serious debt, and the chance to rebuild your financial life once the trust deed term has ended. They’re a debt solution that’s only available to residents of Scotland, and generally last for four years although there are certain factors that can affect this length of time.
One of these factors is whether or not you own your own home. Many homeowners have concerns that their home might have to be sold when they enter a trust deed, but this is not automatically the case as the outcome largely depends on the level of equity available in the property.
Using property as part of a trust deed
If your home is mortgaged, the equity figure will be the property’s value minus the amount needed to repay the mortgage. Sometimes there is little benefit for the trust deed administrator to use property as part of a settlement if the equity is minimal.
On the other hand, should you decide to sell your home, you may be able to end the trust deed earlier than four years, if your creditors are repaid in full (plus interest), and all the trust deed costs have been covered.
When a trust deed lasts longer than four years
A trust deed may last longer than the standard term of four years in certain circumstances:
- If the Trustee negotiates relatively low monthly payments in comparison with your overall debt, it may be necessary to extend the term so that creditors approve the arrangement.
- Some providers charge excessive fees when arranging trust deeds, which results in a longer term than four years.
- If you inherit money or receive a windfall during the term of your trust deed, it’s likely that the Trustee will either increase your repayments or extend the trust deed term to provide your creditors with a higher return.
- It’s possible that your circumstances could change during the initial four-year term – redundancy, for example, or being unable to work due to ill-health. In these cases your Trustee may allow you to take a payment ‘holiday’ but extend the term at the end of the trust deed.
It’s important to take care when approaching trust deed providers to ensure they are reputable – in particular, be wary of excessive trust deed fees that might result in a needlessly extended term.
What happens at the end of a protected trust deed?
At the end of your trust deed any debts remaining are written off, and your details are removed from the Scottish trust deed register within three months. You’ll also receive a certificate of completion from your Trustee to confirm that you’ve met your obligations.
As far as your credit file is concerned, it should be amended to show that the trust deed has been successfully completed. It will be difficult to obtain credit or other borrowing for several years after the trust deed.
So approximately how long after a trust deed could you get a mortgage? This largely depends on the lender, but it’s likely that you’ll pay a higher interest rate than a ‘standard’ mortgage if you’re successful with an application.
Scotland Debt Solutions has extensive experience of negotiating trust deeds on behalf of our clients, and can provide reliable and comprehensive trust deed information. The length of a trust deed is an important aspect of the arrangement, as it determines when you can start to rebuild your financial life. Call one of our expert insolvency practitioners to arrange a confidential consultation free-of-charge.
A Debt Arrangement Scheme (DAS) is a government backed scheme which allows you to repay debt through contractual, monthly instalments without the threat of legal action and incurring penalties or interest. The scheme was established in 2004 for Scottish residents in debt, providing an alternative solution to sequestration, the Scottish equivalent of bankruptcy. A Debt […]
Sequestration is a serious form of insolvency action, equivalent to bankruptcy in the UK, which can affect your chances of getting a mortgage. Once placed into sequestration, your assets and equity will be transferred to the ownership of a trustee who will manage the sale in order to release cash and repay creditors. After sequestration, […]
The typical term of a Trust Deed is four years, so it’s quite possible a debtor’s employment situation will change during this time. If you’re in a Trust Deed and fear you may become unemployed, or have already lost your job, you need to know how it will affect your Trust Deed. So let’s look […]
If you’re getting married and are worried about what happens to your personal debts, initially you need to consider whether the debts are in your name only, or are joint with your partner – this determines if your spouse can be held responsible for repayment. So let’s look at the legal situation regarding personal debt […]
Your credit file is an important source of information for lenders and other financial institutions, and a bad credit rating can affect your life in a number of ways. Given that a default remains on your credit record for six years, it’s also a long-term issue. An obvious scenario where a bad credit rating will […]
Being in debt can be a huge burden that affects every part of your life, but one of the most difficult aspects is when you’re in a relationship, as it can be very difficult to tell your partner about your debts. According to research by relationship charity, Relate, one in seven adults in Great Britain […]