What happens if you miss a payment on your Trust Deed?

If you're in a Trust Deed and your financial circumstances have changed, you may be worried about what happens if you can't keep up with your monthly payments. Perhaps you've lost your job, had your hours reduced at work, been affected by illness, or faced an unexpected expense. Whatever the reason, it's important to know that a change in circumstances doesn't automatically mean your Trust Deed will fail, but you do need to act quickly if you find yourself in this position.

The most important thing you can do is contact your trustee as soon as you realise your ability to make your next Trust Deed payment has been affected. The earlier you get in touch, the more options will be available to you.

What should I do if I cannot afford the Trust Deed payment?

If you know you are going to fall behind on your Trust Deed, you need to contact your appointed trustee as a matter of urgency.

Your trustee has a duty to monitor your financial position throughout the life of your Trust Deed. They'll write to you at least every six months to review your income and expenditure and assess whether your current monthly payment amount is still appropriate.

If something changes between these scheduled reviews, for example, you lose your job or your household income drops for any reason, you should notify your trustee immediately and provide evidence to support the change. This might include a letter from your employer, payslips showing reduced hours, or documentation of a new essential expense.

Once your trustee understands your new circumstances, they'll consider all the relevant factors before deciding on the best course of action going forwards.

What can your trustee do?

Depending on your situation, your trustee has several options available. They can:

• Reduce your monthly payment amount. If your disposable income has decreased, your trustee may lower your monthly payment to a level which is more affordable.
• Suspend your payments temporarily. If your change of circumstances is expected to be short-term, for example, you're between jobs but actively seeking work, then your trustee may agree to a temporary payment holiday. This gives you breathing room without putting the Trust Deed at risk.
• Extend the term of the Trust Deed. If your payments need to be reduced or suspended, the overall length of your Trust Deed may be extended to ensure your creditors still receive a fair return. This means you'll be in the arrangement for longer, but your monthly repayment amount would reduce.
• Increase your monthly payment amount. It works both ways. If your circumstances improve during the term of the Trust Deed, perhaps you get a pay rise, a new job, or receive an inheritance, your trustee may increase your contribution. This is a normal part of the process and ensures creditors benefit from any improvement in your financial position.

What happens if you stop paying towards your Trust Deed?

If you stop making payments without telling your trustee, or if you're unable to maintain any level of contribution over a sustained period, the consequences can be serious and result in the Trust Deed failing.

If this happens, your trustee, or any of the creditors included in the Trust Deed, can petition for your sequestration (the Scottish form of bankruptcy). This is a significantly more serious step that could affect your home, your assets, and your financial future in ways that a Trust Deed would not.

This is why communication with your trustee is so critical if you are experiencing financial difficulties. Being unable to pay your Trust Deed payment does necessarily mean that the Trust Deed will fail, but you do need to engage with your trustee and work together to find a solution.

What if you can't afford to pay anything towards your Trust Deed at all?

There are situations where a person's circumstances change so drastically that even a reduced payment towards their Trust Deed isn't feasible. If this happens, your trustee will discuss the options with you honestly.

In some cases, it may be that the Trust Deed is no longer the most appropriate solution for your situation, and an alternative such as sequestration may need to be considered. While this can feel like a setback, this is a legitimate debt solution designed to help people in exactly this kind of situation, and they can still lead to a fresh financial start.

Can you avoid problems before they start?

If you're already in a Trust Deed, there are some practical steps you can take to reduce the risk of falling behind:

• Keep your trustee informed. If anything changes such as a new job, a pay cut, a new baby, or an unexpected bill then let them know straight away.
• Budget carefully. Your agreed monthly Trust Deed payment is calculated after taking off reasonable living expenses, so it's important to stick to the budget you've agreed. If you're finding it difficult to maintain your bills alongside your Trust Deed payment, speak to your trustee about whether the figures need adjusting.
• Don't take on new debt. While borrowing more money while in a Trust Deed is not forbidden, this additional financial pressure could put the whole Trust Deed at risk. If you need emergency funds, speak to your trustee first as there may be alternatives, such as adjusting your payments temporarily.

How can Scotland Debt Solutions help?

We understand that falling behind on Trust Deed payments is an incredibly stressful situation. The very best thing you can do is to contact your trustee immediately so you can assess your options.

If you're already in a Trust Deed with us and your circumstances have changed, please get in touch as soon as possible so we can review your situation. Call our confidential advice line on 0141 292 6587 or contact us via WhatsApp for immediate help.