Reviewed 5th December 2019
While you are probably feeling a sense of relief that the process is now behind you, and excitement for a debt-free future, you may also be asking yourself – what happens now?
Well the good news is that there is nothing more for you to do. When you signed up for your Trust Deed, you agreed to make monthly payments towards your debts for a set period of time, typically four years. Now these four years are up, any remaining unsecured debt will be automatically written off. Any creditors who were included in the Trust Deed cannot ask you for the balance of any amount they are still owed. Simply put, you will have no more to pay.
For the most part you can relax knowing that your debt problems are now behind you. However there are some steps you can take to put yourself on the best financial footing going forwards:
1. Check your credit file has been updated – Undoubtedly your credit file will have taken a hit when you entered into the Trust Deed. However you should ensure that your file now reflects the fact that you are free from the debts associated with this
2. Get into the savings habit - One of the benefits of a Trust Deed is that you will have proven to yourself that you can live within a budget. While it’s certainly exciting knowing that your next pay packet will be all yours without any creditors to pay, you should try to maintain the good money management skills you have learnt. Now could be the perfect opportunity to get into the savings habit and build up an emergency fund for a rainy day.
- Any creditors included in the Trust Deed will have registered a default on your report; these defaults should be registered no later than the start date of the Trust Deed.
- On completion of your Trust Deed, your creditors should have marked these debts as settled and satisfied. This process should happen automatically but if your credit file hasn’t been updated within 3 months of your final payment, you should write to your creditors and ask them to make this change on your file.
3. Rebuild your credit rating – While you may have no desire to take out credit for the time being, there may be a time in the future when this is needed such as when you want to take out a mobile phone contract or a mortgage to fund a house purchase. It is therefore important that you look to rebuild your credit worthiness as soon as possible. This can be done in a number of ways
- The number one thing you should do is to ensure you to keep up repayments on any current financial arrangements you have which were not included in the Trust Deed, such as a mortgage.
- You should also ensure that you remain in credit in your current account and not do go over any agreed overdraft limits.
- The next suggestion requires a lot of discipline, and you should only do this when you feel ready to handle credit again. A great way to rebuild your credit score is to apply for a basic credit card. Due to your credit history, this will typically be a card with a low credit limit and a high rate of interest. The goal with this card is to spend a small amount of money on it, money you would have spent anyway, such as a weekly shop or your commuting costs into work. You must then ensure you pay the entire amount off when it is due. This way you will not be charged any interest. This behaviour will help reassure other lenders that you are now managing your money in a more sensible way. The major warning with this approach is that if you fail to pay this card off, the interest will quickly mount, and you will do serious further damage to your credit rating so think carefully before going down this route.
Your Trust Deed will remain on your credit file for a total of six years. When the six years are up, any reference to it falls off your record, and by following the steps above, you will hopefully be left with a healthy credit rating.
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Get Your ReportFAQ on Trust Deeds
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?
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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 will be wiped out.
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