Can I include Hire Purchase debts in a Trust Deed?
Hire Purchase (HP) agreements allow borrowers to loan items, such as cars, TVs, washing machines and other appliances, in exchange for agreed monthly payments.
Hire Purchase debts are technically 'secured' debts, as they're borrowed against the value of the goods. Failing to keep up with payments normally means you'll simply have to return the item.
Because a Trust Deed only includes unsecured debts, you won't be able to include any Hire Purchase debts you have. However, your payments into a Trust Deed will be calculated to fit around your essential monthly expenses. As such, if your Hire Purchase agreement is for an essential item (such as a car that you need for work), and it's not deemed to be excessively expensive), you should be able to carry on as normal with that agreement.
When your Trust Deed comes to a successful end, you'll be free of any included unsecured debt that remains.
What will happen to my Hire Purchase debts if I enter a Trust Deed?
As a Hire Purchase debt is a secured debt, you won't be able to include one in a Trust Deed. This means you'll still have to carry on repaying your Hire Purchase debt/s as usual while you're making your monthly payments into your Trust Deed.
One of the advantages of a Trust Deed, however, is that your monthly payments will be lowered enough so that all your monthly essentials should be affordable.
How could a Trust Deed help me?
If you can't afford to repay a significant amount of unsecured debt within a reasonable timeframe, a Trust Deed could be the approach you need.
A Trust Deed works by lowering your monthly payments to an affordable level - so you'll still be able to keep on top of all your essential monthly expenditure (such as rent/mortgage, utilities and food).
Although homeowners may have to release some equity during a Trust Deed, unlike bankruptcy you won't be at risk of having your home repossessed - as long as you keep up with all your payments. You'll also be legally protected against any further action from your unsecured lenders.
You'll make your payments for an agreed period of time (usually four years), and once your Trust Deed has come to a successful end, you'll have any unsecured debt that remains written off.
A Trust Deed will affect your credit rating in the medium to long term and for six years after it starts.
Article Updated 12/12/2013