What happens when a Trust Deed ends?

December 2, 2016

Your Trust Deed has finally come to an end; you’ve made all your payments and have been formally discharged. Congratulations! While you are probably feeling a sense of relief that the process is now behind you, and excitement for a debt-free future, you may also be asking yourself – what happens now?

Well the good news is that there is nothing more for you to do. When you signed up for your Trust Deed, you agreed to make monthly payments towards your debts for a set period of time, typically four years. Now these four years are up, any remaining unsecured debt will be automatically written off. Any creditors who were included in the Trust Deed cannot ask you for the balance of any amount they are still owed. Simply put, you will have no more to pay.

For the most part you can relax knowing that your debt problems are now behind you. However there are some steps you can take to put yourself on the best financial footing going forwards:

 

1. Check your credit file has been updated – Undoubtedly your credit file will have taken a hit when you entered into the Trust Deed. However you should ensure that your file now reflects the fact that you are free from the debts associated with this

 

2. Get into the savings habit – One of the benefits of a Trust Deed is that you will have proven to yourself that you can live within a budget. While it’s certainly exciting knowing that your next pay packet will be all yours without any creditors to pay, you should try to maintain the good money management skills you have learnt. Now could be the perfect opportunity to get into the savings habit and build up an emergency fund for a rainy day.

  •    Any creditors included in the Trust Deed will have registered a default on your report; these defaults should be registered no later than the start date of the Trust Deed.
  • On completion of your Trust Deed, your creditors should have marked these debts as settled and satisfied. This process should happen automatically but if your credit file hasn’t been updated within 3 months of your final payment, you should write to your creditors and ask them to make this change on your file.

 

3. Rebuild your credit rating – While you may have no desire to take out credit for the time being, there may be a time in the future when this is needed such as when you want to take out a mobile phone contract or a mortgage to fund a house purchase. It is therefore important that you look to rebuild your credit worthiness as soon as possible. This can be done in a number of ways

  • The number one thing you should do is to ensure you to keep up repayments on any current financial arrangements you have which were not included in the Trust Deed, such as a mortgage.
  • You should also ensure that you remain in credit in your current account and not do go over any agreed overdraft limits.
  • The next suggestion requires a lot of discipline, and you should only do this when you feel ready to handle credit again. A great way to rebuild your credit score is to apply for a basic credit card. Due to your credit history, this will typically be a card with a low credit limit and a high rate of interest. The goal with this card is to spend a small amount of money on it, money you would have spent anyway, such as a weekly shop or your commuting costs into work. You must then ensure you pay the entire amount off when it is due. This way you will not be charged any interest. This behaviour will help reassure other lenders that you are now managing your money in a more sensible way. The major warning with this approach is that if you fail to pay this card off, the interest will quickly mount, and you will do serious further damage to your credit rating so think carefully before going down this route.

Your Trust Deed will remain on your credit file for a total of six years. When the six years are up, any reference to it falls off your record, and by following the steps above, you will hopefully be left with a healthy credit rating.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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