Reviewed 5th December 2019
Creditors vote on whether to accept the repayment arrangement, which becomes protected if they agree.
It is an effective way to repay your creditors without the need to enter sequestration, but what happens if your debts build up again further down the line? You are able to enter into more than one trust deed, but you must have been discharged from the first before you enter into a second arrangement.
Your creditors may be reluctant to agree a second trust deed, particularly if the discharge date was relatively recent. Your chances of success depend on factors individual to yourself, including the history of repayment during the first trust deed, how much debt was written off at the end, and your current level of debt.
Much depends on the insolvency practitioner appointed to help you – for example, how much practical experience they have of negotiating with creditors under these circumstances.
If the Trustee can persuade creditors in your favour, and provide sufficient evidence that you are able to meet the monthly repayments, a second trust deed will operate in the same way as the first.
Your Trustee’s powers of persuasion and negotiating expertise may dictate the outcome of your application for a second trust deed. Initially, they will assess your financial situation to ensure that a trust deed is going to be the best option, rather than the Debt Arrangement Scheme, for example, or sequestration.
Ultimately, your creditors need to judge whether they will receive more money if you enter a trust deed than they would if you were sequestrated, and this case is put forward to them in a formal proposal.
In order to prepare this the Trustee will need to know why your debts have become unmanageable again – you may have recently been made redundant, for instance, or have suffered a long-term illness that reduced your ability to earn an income for a while.
When deciding whether to recommend you for a second trust deed, the Trustee will take other factors into consideration, such as if there were problems during the first trust deed. If your previous trust deed failed, it may have been for reasons outside your control, but these aspects will also be a factor when creditors vote.
If the term of your first trust deed has not yet ended, you will not be able to enter into a second arrangement.
Our experts at Scotland Debt Solutions will offer help and support if you are struggling with debt. We can establish your current financial situation, identify your best options, and provide the professional support you need at this stressful time. Call one of the team for an initial meeting free-of-charge – we work from five offices around Scotland.
A long-term personal debt crisis is an inevitable consequence of the Covid-19 pandemic unless urgent action is taken to support people in financial trouble.
Food banks across the UK are expecting to see a significant rise in demand this winter as compared with the same period of last year.
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.