One of these factors is the adverse effect a trust deed has on your credit rating, and the potential impact on your financial situation both during the trust deed term and in the future.
It has to be said that any form of official debt process, or even the original defaults that led to consideration of this option, also remain on your credit file for six years. So if you’re in a position where debt has become unmanageable, at least you’re taking positive action by choosing the trust deed route.
Although you’re taking responsibility for your financial position, and positive action to remedy the situation, entering a trust deed demonstrates that you haven’t been able to meet the contractual terms and conditions of lending in the past.
Credit files are used by financial institutions to inform their lending decisions, and help to establish whether applicants can afford repayments over the lending term. They’re a vital part of the application process on which lenders rely to control their risk.
So how long do trust deeds remain on a credit file, and what can you do if you find that your record is inaccurate?
A trust deed remains on your credit file for six years, a timescale that exceeds the term of most trust deeds which are generally completed in three or four years. When you’ve successfully completed the trust deed having met all your obligations, creditors included in the agreement should inform the credit reference agencies that their debt has been ‘settled’ or ‘satisfied.’
During the trust deed term, however, and even when you’ve been discharged, you’re likely to experience difficulty in obtaining credit or further borrowing until you’ve been able to rebuild your credit rating.
If your credit file is inaccurate it could affect your ability to borrow further into the future, so it’s a good idea to send the credit reference agencies a copy of the discharge certificate issued by your trustee.
A few weeks after you’ve been discharged from the trust deed, you should obtain a copy of your credit file from all three main credit reference agencies – Experian, Equifax, and Callcredit – to make sure it’s been updated and that the information they hold about you is accurate.
The insolvency practitioner acting as your trustee isn’t responsible for updating your credit record, and although your creditors have obligations under the Data Protection Act, you cannot always guarantee they will update the credit reference agencies on your situation. This is why it’s important to take this aspect of the process into your own hands.
The benefit of entering into a trust deed is, at the end of the process, any remaining debt is written off, giving you the opportunity to rebuild your damaged credit file and start again with a ‘clean slate.’
If you would like more information about Scottish trust deeds and their impact on your credit file, Scotland Debt Solutions can help. We specialise in helping Scottish residents escape debt, and operate from five offices around Scotland. Call one of the team to arrange a free same-day consultation.
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Applying for a trust deed has been on my mind for some time but I’m concerned that all creditors may not agree to my trust deed? What if one of them doesn’t agree?
Yes, although a Trust Deed is not a court process the creditors you have made defaults with are likely to notify the credit reference agencies that you have missed payments. There will be an entry on the Register of Insolvencies that you are subject to a Trust Deed.
A Trust Deed can be setup very quickly. Once you have discussed your financial situation in full with an Advisor and taken time to consider that this is the most appropriate option taking all factors into account. The Trust Deed document and accompanying paperwork can be signed which then gives the Trustee the relevant powers to act on your behalf. The Trustee will make contact with all your creditors and from that point you can stop making payments to the individual creditors and pass all correspondence for the Trustee to deal with. Thus relieving you from the pressure instantaneously.
The Trustee will write to you every six months throughout the period of your Trust Deed to monitor and assess your Financial Position and your ability to maintain the contribution at the current level.
There are no initial setup or additional hidden costs in a trust deed. The Trustee’s fee’s and outlays for administering your trust deed are met from the contributions you pay in on a monthly basis or/and from the assets which may have to be realised in your Trust Deed. The Trustee is paid prior to making a distribution to your creditors. The Trustee’s fees are broken down into three categories, fixed fee, percentage of realisations and costs and expenses associated with the Trust Deed.
A protected Trust Deed is binding on your creditors. It means that if you comply with the terms of your trust deed then the creditors cannot take any further action against you to recover any debts you might be due to them. They cannot arrest your earnings or petition for your sequestration whilst you are subject to a Protected Trust Deed. Unlike an ordinary Trust Deed which is not binding on your creditors. If when presented with your Trust Deed Proposals more than half in number or one third in value of creditors object to your Trust Deed then it will fail to reach protected status.
The Trustee will write to you every six months throughout the period of your Trust Deed to monitor and assess your Financial Position and your ability to maintain the contribution at the current level. In addition to this the Trustee will explain at the outset of the Trust Deed that should you have any change in circumstance which will affect your ability to make a contribution you must update him with immediate effect. If you have a change in circumstance and notify the Trustee of this providing evidence to substantiate your change in circumstance. The Trustee will take all factors into account before making a decision as to whether to reduce, suspend, stop or infact increase your contribution. It may be depending on the circumstance that your Trust Deed period is extended or shortened or that you are able to suspend the payments until such time as your Income position improves.
The main differences between and IVA and Trust Deed are that one is an English Debt Relief process and the other is a Scottish debt relief process. An IVA can only be accessed by English and Welsh residents whereas Trust Deeds are only available for Scottish Residents. In an IVA you must have minimum unsecured debts of £15,000 whereas a Trust Deed is a minimum of £5000. The duration is also slightly different in that an IVA generally lasts for sixty months whereas a Trust Deed lasts for forty eight months.
I am a single mother of two children with a number of debts and loans, including some spiralling payday loans that are stressing me out. I have looked into debt management plans and trust deeds and it seems as though the trust deed is the best option but I’m not sure whether I can consolidate all my debts into one monthly payment? Can loans be included in this?
Our Scottish based team can help advise you on your debt problems.