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What debts can I include in a trust deed?

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Reviewed 23rd December 2021

You may have debts which fall in to either or both of these categories. As each class of debt is viewed differently it is important to know the difference between secured and unsecured borrowing before deciding which debt solution is right for you.

Secured v Unsecured debts

Secured debts are those which are tied to a specific asset, typically property or vehicles. In the event of you being unable to keep up with the agreed monthly repayments, the lender can seize this asset and sell it in order to recoup the money they are owed. Unsecured debts, however, are not underpinned by anything other than a promise by the borrower to repay the money which has been lent. Should you default on an unsecured loan the lending company is allowed to chase you for payment, however, as they do not have the security of an asset they cannot remove your possessions without first going through the court.

What can I include in a trust deed?

The majority of unsecured debts can be added to a trust deed, including the most popular forms of borrowing such as credit cards, store cards, and personal loans. Any personal VAT or income tax arrears can likewise be included, as can bank overdrafts, payday loans, and catalogue debts. A trust deed cannot be used to pay off secured debts including mortgages, second charges on your property, or hire purchase agreements such as car finance or payment plans on white goods such as fridges or washing machines. You should also check whether any of your loans have been co-signed by a guarantor; these are often asked for when applying for a short-term loan from a company specialising in lending to those with poor credit. There are also other debts which you cannot incorporate into your trust deed. These include:

  • Student loans
  • Court fines
  • Any debt that has been accrued through fraudulent means

If you do have any of these types of outstanding debt, then you are still able to enter into a trust deed, however, you must be aware that these will not be included in the agreement and that you must continue to make the monthly repayments on these separately.

Dealing with secured loans when in a trust deed

Even though you will need to continue to service any secured borrowing, the good news is that your contractual monthly payments on these secured loans will be taken into account by the trustee when drawing up your proposed agreement. This means that the amount you have left over to pay into your trust deed will be reduced to reflect these secured loan payments. With this in mind, however, in order to be eligible for a trust deed you must have some money with which to pay the creditors included in the arrangement. If you do not have any money left over after paying your necessary bills and secured debts, then you will not be able to enter into a trust deed and instead you will have to consider an alternative debt solution such as sequestration.

How Scotland Debt Solutions can help

Knowing which debt solution is the right one for you and your circumstances can be difficult. It is therefore vital that you seek expert help and advice from a professional to ensure you make the best decision possible. Scotland Debt Solutions have been helping Scots manage their debt problems for almost 30 years and are perfectly placed to help you too. 

By taking out a trust deed with Scotland Debt Solutions, we can help stop the phone calls and letters from those you owe money to. We will take responsibility for liaising with your creditors and letting them you that you have entered into a Trust Deed, and that all further communication must go through us.  Call our advisers today on 0800 063 9250 to arrange an appointment with our debt experts.

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FAQ on Trust Deeds

Do I have to get my creditors to agree to my trust deed?

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?

How does entering a Trust Deed affect your credit rating?

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.

How long does it take to set up 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.

What are the consequences of not keeping up payments of a trust deed?

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.

What are the set-up costs of a Trust Deed?

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.

What does a protected trust deed mean?

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.

What would the consequences be if I missed a trust deed payment despite my circumstances clearly changing?

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.

Whats the difference between an IVA and a Trust Deed

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.

Will all my debts be covered by the terms of a Trust Deed?

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?


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Sequestration is the Scottish version of bankruptcy and may be suitable for you if you do not have the money to pay back your debts

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