Trust deed is a formal debt settlement agreement to make reduced payments across your debts for a set period
In a nutshell A Trust Deed is a legally binding debt solution in Scotland (equivalent to an Individual Voluntary Agreement in the remainder of the UK). The debt settlement agreement sets out affordable repayments which are made over a period of 4 years, after which time your remaining debts will be written off.
What debt problems is this debt help suitable for?
A Trust Deed provides bad debt help for those suffering from serious financial issues.
Our debt expert’s opinion on the pros and cons…
Advantages of Trust deed debt solution
- As a Trust Deed runs for a set term this form of bad debt help provides certainty and a set date by which time you’ll be debt free.
Disadvantages of Trust deed debt solution
- As this form of debt assistance is a type of insolvency it will negatively impact your credit record for a minimum of 6 years.
- Your details will be recorded on a publicly accessible ‘Register of Public Insolvencies’.
- You may be required to remortgage your home in order to release any equity.
- This choice of bad debt help may hinder your professional life, as some professions don’t allow their members to sign up for a Trust Deed.
- There is an insolvency practitioner fee, which will add to your debts.
Read more about Trust Deed Pros and Cons
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FAQs – Trust Deed
How long does a Trust Deed take to set up?
As soon as you’ve sent your paperwork to the Trust Deed Company the application process will begin. The process could be as short as 5 days, but on average 6-8 days is more typical.
How much does it cost to set up a Trust Deed?
It doesn’t cost anything to set up a Trust Deed, you’ll only be responsible for making repayments towards your debts which are rolled into it.
The only two exceptions that would require an increase in your repayments is where your home increases significantly in value, or where you receive a lump-sum payment.
I’m self-employed – do I qualify?
Yes – you’re still eligible to apply for a Trust Deed and would go through the usual process as all other applicants.
How will my credit rating be affected by a Trust Deed?
Your credit rating will be negatively impacted until you complete your Trust Deed. During the time that the Trust Deed is active you won’t be allowed to apply for any credit. Once the Trust Deed is complete you will once again be able to use credit. However the fact that the Trust Deed will be recorded on your credit record, and as a Trust Deed is a form of insolvency, you may struggle to be approved for credit products in the future.
How long will my Trust Deed last?
The average period for a Trust Deed is 48 months (4 years), however some debtors repay early – most commonly if they’ve inherited money or sold property; while others may have to extend the period if their circumstances take a turn for the worse.
What will my repayments be?
Your Trust Deed will be unique to you, and the repayments will depend on multiple criteria, including your total debt, and your income and expenditure. A Trust Deed will always be set up to involve repayments that you can genuinely afford. However there is a minimum repayment level, and if your income/expenditure doesn’t allow you to meet this, then you may be Sequestrated.
How do I apply for a Trust Deed?
You should start by researching and finding a reputable company. You can contact your local Citizens Advice Bureau for advice in this respect. Once you’ve received a recommendation, contact the company in question and prepare to send them the following:
• A full list of your creditors, including the amounts owed and account numbers/references
• A breakdown of your income/expenditure
• A list of your assets – such as property, vehicles and jewellery
Will I have to sell my house if I enter into a Trust Deed?
The approval of your Trust Deed could rely on you being willing to sell your home, unless you qualify for an exclusion. The terms and conditions of exclusions are complex, and you should seek legal advice on the matter if you’re a homeowner considering a Trust Deed.
You can read more about the exclusion terms in section 2.8 of the Accountant in Bankruptcy’s Trust Deed Guidance.
What happens after I successfully complete my Trust Deed?
Once the set period is over and you’ve met all your repayments you will be legally free from all of your debts. You’ll be given a certificate of completion, and your credit record will reflect the closure of the Trust Deed. From here on out, if you’re responsible with your borrowing, your credit record should begin to improve.