What debts can I include in a trust deed?

July 16, 2018

When it comes to debt, there are two main types which you may be dealing with: secured and unsecured. You may have debts which fall in to either or both of these categories. As each class of debt is viewed differently it is important to know the difference between secured and unsecured borrowing before deciding which debt solution is right for you.

Secured v Unsecured debts

Secured debts are those which are tied to a specific asset, typically property or vehicles. In the event of you being unable to keep up with the agreed monthly repayments, the lender can seize this asset and sell it in order to recoup the money they are owed.

Unsecured debts, however, are not underpinned by anything other than a promise by the borrower to repay the money which has been lent. Should you default on an unsecured loan the lending company is allowed to chase you for payment, however, as they do not have the security of an asset they cannot remove your possessions without first going through the court.

What can I include in a trust deed?

The majority of unsecured debts can be added to a trust deed, including the most popular forms of borrowing such as credit cards, store cards, and personal loans. Any personal VAT or income tax arrears can likewise be included, as can bank overdrafts, payday loans, and catalogue debts.

A trust deed cannot be used to pay off secured debts including mortgages, second charges on your property, or hire purchase agreements such as car finance or payment plans on white goods such as fridges or washing machines. You should also check whether any of your loans have been co-signed by a guarantor; these are often asked for when applying for a short-term loan from a company specialising in lending to those with poor credit.

There are also other debts which you cannot incorporate into your trust deed. These include:

  • Student loans
  • Court fines
  • Any debt that has been accrued through fraudulent means

If you do have any of these types of outstanding debt, then you are still able to enter into a trust deed, however, you must be aware that these will not be included in the agreement and that you must continue to make the monthly repayments on these separately.

Dealing with secured loans when in a trust deed

Even though you will need to continue to service any secured borrowing, the good news is that your contractual monthly payments on these secured loans will be taken into account by the trustee when drawing up your proposed agreement. This means that the amount you have left over to pay into your trust deed will be reduced to reflect these secured loan payments. With this in mind, however, in order to be eligible for a trust deed you must have some money with which to pay the creditors included in the arrangement. If you do not have any money left over after paying your necessary bills and secured debts, then you will not be able to enter into a trust deed and instead you will have to consider an alternative debt solution such as sequestration.

How Scotland Debt Solutions can help

Knowing which debt solution is the right one for you and your circumstances can be difficult. It is therefore vital that you seek expert help and advice from a professional to ensure you make the best decision possible. Scotland Debt Solutions have been helping Scots manage their debt problems for almost 30 years and are perfectly placed to help you too. Call our advisers today on 0800 063 9250 to arrange an appointment with our debt experts.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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