Can a store card debt be part of my Protected Trust Deed?
A store card debt can be included in a Protected Trust Deed - though there are conditions that would have to be met before you could actually begin one.
Basically, all unsecured debts - like credit cards, store cards, overdrafts and personal loans - could be included in a Trust Deed, if you're eligible for one.
To be eligible, you have to be a resident of Scotland who's really struggling with their unsecured debts of at least £5,000 or £10,000 if they’re joint debts. You must be unable to meet your unsecured debt repayments every month - and unable to pay off your debts in full in any reasonable timeframe. You should have a reliable income, however, as you will be required to make steady monthly payments for around four years.
Can a Trust Deed help with secured debts?
Secured / 'priority' debts, like your mortgage or rent, can't be included in a Trust Deed. A Trust Deed can, however, help you stay on top of your secured debts. It does this by lowering the amount you pay towards your unsecured debts every month to a level you can manage.
A qualified Insolvency Practitioner (IP) will make sure that your new monthly payments on your Trust Deed shouldn't interfere with your essential costs - like your secured debts, as well as things like food and petrol. This means that you should be able to tackle your unsecured debts and carry on meeting your essential costs each month.
A Trust Deed can affect your mortgage, however. Though you won't be asked to sell your home - as you might during bankruptcy - it's likely that you will be asked to release equity in your home so you can pay more into your Trust Deed. If you can’t release any equity then your Trust Deed may be extended by 12 months.
How can a Trust Deed help?
Along with reducing your monthly repayments to a level you can afford, a Trust Deed has other benefits - as long as enough of your unsecured lenders agree to the terms you and your IP propose.
For example, a Protected Trust Deed gives you legal protection from your lenders, making them unable to ask for higher payments, petition for your bankruptcy or take you to court - as long as you stick to the terms of the Trust Deed. To become protected, your Trust Deed must be agreed by at least half of your unsecured lenders who hold at least a third of your debt.
After four years, provided you've stuck to your payments as you agreed, your Trust Deed will be complete and any remaining unsecured debt that you haven't managed to repay will be written off.
Your IP will guide you through the process of your Trust Deed and will be able to provide you with help and advice if your circumstances change, or if you simply have any questions.
If you're interested in a Trust Deed and would like to discuss your options with a debt professional, fill out our debt solution finder for some debt advice.
Though a Trust Deed could help you tackle your unsecured debt problem, it does come with disadvantages - for example, a damaged credit rating in the medium to long term. It's worth noting, however, that if you continue struggling with your unsecured debts on your own, your credit rating will probably be damaged anyway.
Article Updated 12/12/2013