A trust deed is a formal debt solution which enables you to make affordable monthly repayments towards your debts for a set period of time, typically four years. After this time is up, so long as you have kept up with the agreed monthly payments, any outstanding debts which were included in the trust deed will be written off. In order to qualify for a trust deed you must owe over £5,000 and not be in a position to clear your debts in full within four years. It is also worth noting that trust deeds are only available in Scotland.
Each case is different and while the majority of trust deeds are accepted, your creditors do not have to agree to the trust deed if they do not want to. This is often because they feel they can receive more money via alternative means. If either 50% of the number of creditors, or creditors representing at least one third of the value of the debts do not agree to you entering such a plan, then your trust deed will fail to gain protected status.
If not enough of your creditors give their agreement, then your trust deed will be what is known as ‘unprotected’. This means the trust deed has no legal standing and creditors are able to continue you to pursue you for the money you owe and also take further legal action should they feel this is necessary. This could include petitioning for your bankruptcy.
You may be able to continue with your unprotected trust deed, however, you must be aware that your creditors are under no obligation to accept the payments you offer and it is also unlikely that they will freeze the interest and stop any charges from being added to your account. If this is the case you could find your debts continue to mount during this period.
Furthermore, not all of your debts will be cleared once the four years is up. Only those creditors who agreed to the trust deed will release you from having to pay any more, any creditors who rejected the trust deed will still expect you to pay back what you owe.
Instead you may need to consider looking at an alternative debt solution to better deal with your problems. The route you choose to take will depend on the reasons why your trust deed was rejected. When it comes to rejection it is often because creditors feel they would stand to receive more money if you were sequestrated (made bankrupt) than by agreeing to the payments offered in the trust deed. If this is the case you may need to consider sequestration as an option, however, you should always ensure you seek expert help and advice before going down this route. Alternatively it may be possible for you to enter into an informal arrangement with your creditors in the form of a debt management plan (DMP), or your creditors may be open to the idea of a Debt Arrangement Scheme (DAS) whereby you would repay all the money you owe but over a longer period of time.
If you are worried that your trust deed may be rejected, or would like some advice as to the most appropriate debt solution for you contact the team at Scotland Debt Solutions today. We have almost 30 years’ experience helping Scots navigate their way out of the toughest debt problems. No matter how bad you feel your situation is, rest assured there is a solution out there and our advisers are perfectly placed to steer you in the right direction. Call us today on 0800 063 9250 to arrange a confidential no-obligation consultation with a debt expert.
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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.