What happens to my Trust Deed if I’m unemployed or lose my job?

The typical term of a Trust Deed is four years, so it’s quite possible a debtor’s employment situation will change during this time. If you’re in a Trust Deed and fear you may become unemployed, or have already lost your job, you need to know how it will affect your Trust Deed. So let’s look at how a Trust Deed works, and whether such a fundamental change in your circumstances is catered for in this legally-binding arrangement.

How does a Trust Deed work?

A Scottish Trust Deed is an official insolvency procedure whereby you hand over control of your assets to a Trustee, and pay a single pre-agreed sum to creditors each month, typically for 48 months. Repayments are designed to be affordable when the Trust Deed takes force, and the monthly amount is carefully calculated by an approved money adviser based on your income and essential expenditures. It’s reassuring to know that a key factor of Scottish Trust Deeds, and a major benefit for those entering them, is the flexibility built in to the arrangement.

Losing your job whilst in a Trust Deed

If you become unemployed after you’ve entered a Scottish Trust Deed, you should inform your Trustee as soon as possible so they can take the necessary measures to prevent the agreement failing. Scottish Trust Deeds are designed with some flexibility, which means the Trustee can apply for a ‘variation’ of its terms to cover instances such as job loss. As your circumstances and ability to pay have reduced considerably, the Trustee may be able to apply for a payment break or reduction in the payment amount.

Unemployment when in a Trust Deed

When the Trustee requests a variation, the reason for your job loss can be an important factor. If it was beyond your control, for example, creditors may be more sympathetic to your situation and agree to the variation for a period of time. If your only income now is state benefits, the Trustee cannot use this money to pay your Trust Deed, and if your benefits have already been used in this way you may be entitled to a refund.

Could the Trust Deed fail due to unemployment?

Whatever the circumstances that have led to your unemployment, the Trustee should do all they can to ensure the Trust Deed doesn’t fail. Applying for a variation in the Trust Deed is likely to be the first step, and this can give you time to look for a new job or otherwise improve your financial circumstances. Your finances will be reassessed, and the Trustee will bear in mind the interests of all parties. If creditors don’t agree to changes in the Trust Deed it’s possible that it could fail, leaving you facing legal action and potential sequestration.

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FAQ

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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