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Can I enter a Trust Deed if I am receiving benefits?

If you're struggling with debt and you're receiving benefits, speak to one of our debt experts, who can discuss your options with you.

If you receive benefits as well as other income, you might still be able to afford the repayments to a Trust Deed - and have part of your unsecured debts written off after four years of payments.

If your benefits are your only income, however, a Trust Deed isn't likely to be the best option. After all, benefits are basically designed to cover the essentials, so you're not likely to have much money you can spare to put towards your debts every month.

If the amount you can afford to repay every month isn't acceptable to your lenders, they'll turn down your request for a Trust Deed - and an IP isn't likely to suggest it as a suitable approach in the first place.

Although people on very low incomes probably won't qualify for a Trust Deed, alternatives are available. Speak to one of our debt experts about the other ways to deal with debt problems in Scotland.

Who can qualify for a Trust Deed?

Trust Deeds are only available to people in Scotland who are struggling to repay debt. You must owe at least £5,000 in individual unsecured debts or £10,000 in joint ones. It's a form of insolvency, so it's an option for people who know they can't afford to repay their unsecured debts in full. If you qualify for a Trust Deed, you'll avoid sequestration if your Trust Deed is successful.

You need a steady income to qualify for a Trust Deed, because you agree to repay monthly amounts for (usually) four years. After that, the rest of your unsecured debt is written off, as long as you've stuck to the terms of your Trust Deed.

This is another reason a Trust Deed might not be suitable for someone who relies on benefits - if they're not reasonably confident they can count on their income staying the same for the next four years, there's no point in entering a Trust Deed.

Homeowners might prefer a Trust Deed to bankruptcy because while you might have to release equity on a Trust Deed (to help you repay your unsecured lenders), bankruptcy could lead to having to sell your house (and other assets). However, releasing equity does decrease the amount of your home that is 'yours' and can increase your mortgage payments. If you can’t release any equity from your home then your Trust Deed could be extended by 12 months

Insolvency stays on your credit record for six years. It can affect your ability to borrow money, for example, find a phone contract, or work in certain professions.

Debt advice in Scotland

We offer specific debt advice in Scotland because the rules about debt management and insolvency aren't the same as they are south of the border. We can explain your options if you're currently out of work, or receiving benefits for any other reason. Leave your details with us and we'll contact you to discuss your options.

Article Updated 12/12/2013