Scottish Trust Deeds help people in serious financial difficulty to repay a proportion of their debt and avoid having to enter sequestration. It’s an official debt procedure, and as such, offers legal protection from creditor action, so what happens if you can’t pay the Trust Deed due to coronavirus?
COVID-19 has caused extensive financial hardship in recent months and if you’re unable to make the agreed repayments on your Trust Deed due to the effects of the pandemic, the trustee should be your first point of contact.
You should contact your trustee as soon as you think you won’t be able to meet the repayments - getting in touch with them quickly shows that you’re not avoiding your obligation, but experiencing a genuine decline in financial situation.
Maybe you’ve lost your job because of coronavirus, have become ill, or are unable to work as many hours as you need to make the payments affordable. When Trust Deeds are originally negotiated and set up, household bills are accounted for before the repayment amount is decided, which ensures you can afford it over the longer term.
Although you can’t cancel a Trust Deed as it’s a formal agreement, it’s recognised that circumstances can alter during the time the arrangement is in force, which is typically five years. That’s why mechanisms are incorporated to ensure that Trust Deeds don’t automatically fail if a debtor’s financial position worsens.
Scottish Trust Deeds provide protection from creditor legal action, so if you can’t make one or more of your repayments you need to inform your Trustee of the situation in order to retain this protection.
You should work with your Trustee to establish how much you can pay to your creditors, and potentially obtain their agreement to a monthly repayment that reflects your new financial situation.
This may be a temporary measure for a few months, or you may be offered a payment break that relieves the pressure on your finances and gives you space to deal with the problems you’re facing. If you do receive a payment break, the month(s) that you miss will need to be added on to the end of the Trust Deed term.
If your Trust Deed fails you lose the protection from creditor legal action, but there may be other options open to you. If your Trust Deed does fail it’s important to be proactive and contact each creditor individually to negotiate a new repayment schedule, so demonstrating your willingness to pay.
You may also be eligible for other Scottish debt procedures, including the Debt Arrangement Scheme (DAS) that is government backed. Sequestration, the term for bankruptcy in Scotland, may also be an option if your financial situation is such that you can no longer afford to pay your Trust Deed.
Although entering sequestration is a drastic measure, it can provide a fresh start and remove the intense pressure of owing large sums of money. It’s important to receive unbiased professional advice in this situation, however, to make sure it’s the right step for you.
Scotland Debt Solutions can help if you can’t afford to pay your Trust Deed due to coronavirus, and are worried about the consequences. We’re debt specialists and help people in Scotland to escape the debt spiral. Please contact one of our expert team for a free same-day consultation – we operate a network of offices around Scotland.
The Register of Insolvencies is a public register that documents Trust Deeds until five years after the discharge date and includes personal details.
Joint Trust Deeds don’t exist, however, if you want to run a Trust Deed that encompasses debts as a couple, this will be two individual Trust Deeds.
Our Scottish based team can help advise you on your debt problems.