Reviewed 13th February 2024
Trust deeds are formal insolvency procedures that are available only in Scotland. They offer a viable alternative to bankruptcy if you’re struggling to repay unsecured debt, and generally last for three to four years.
Trust deeds work by transferring your assets to the trustee, and making a single affordable monthly repayment that is then distributed to creditors included in the agreement. Here we look at various aspects of trust deeds that can help you decide whether this personal insolvency process would work for you.
You may be eligible for a trust deed if you:
Get a rough indication of what your monthly repayments might be under each of our different debt solutions.
Assets and monthly contribution
When you agree to a trust deed you must transfer most of your assets to the control of the trustee, who will then sell them for the benefit of your creditors. If you’re a homeowner with equity in your property, you may also be required to release this to increase creditor returns. The insolvency practitioner assesses your income and expenditure and arrives at a monthly trust deed contribution after deducting essential living costs, including mortgage/rent payments, utility bills, and food.
Once you have taken out a trust deed with Scotland Debt Solutions, we will make sure the phone calls and threatening letters from those you owe money to stop. This is because will take full responsibility for liaising with your creditors and informing them that you have entered into a trust deed. From that point all further communication will be sent to us rather than you.
If your trust deed isn’t protected it means interest can be added to your debt. It also leaves you open to legal action by creditors who haven’t agreed to the arrangement, so this is an important aspect of how trust deeds work and their future success. Hopefully a sufficient number of creditors will agree to the terms of the trust deed when the insolvency practitioner distributes the proposal, but there are cases where the arrangement has to remain unprotected:
A trust deed is designed to help you repay a proportion of your unsecured debt. This could include credit and store card debt, bank overdrafts or personal loans, payday loans, and catalogue debt. It doesn’t include secured loans such as your mortgage, or hire purchase agreements. If you have these types of debt, repayments are included in the calculation of your essential living costs. This is what makes trust deeds affordable, as your priority payments are budgeted for prior to the trust deed repayment.
One of the benefits of entering into a trust deed is that any debt remaining at the end of the term is written off, leaving you debt-free. Your creditors will be aware of the proportion of debt they’re likely to recoup, and cannot pursue you any further for this money once the arrangement comes to an end.
The trust deed remains on your credit record for six years from the start date, even though its term is shorter, and is likely to affect your ability to borrow during this time and potentially beyond.
For more information on how Scottish trust deeds work and whether they’re an appropriate solution for you, contact our experts at Scotland Debt Solutions. With five offices around Scotland we can quickly assess your financial situation and establish your best options. Please call to arrange a free consultation.
Our debt report is completely easy to use and is a great starting point for anyone with over £5000 of debts looking to take control of their debt issues. By providing us with details of your incomings and outgoings we can suggest the most appropriate way forward for you.
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A Trust Deed involves making a monthly contribution to your debts for up to four years. After this time any remaining debt included in the Trust Deed will not need to be paid.Find out More
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