Can you extend a Trust Deed?
A Trust Deed, once agreed, will usually last four years. However, if absolutely necessary you may be able to have the agreement extended to help you repay more of your unsecured debt.
You can't extend a Trust Deed yourself. When you start one, you will be assigned a Trustee, who will overlook the process. They will be able to negotiate with your lenders to extend your Trust Deed if they think it's appropriate.
Why would a Trust Deed be extended?
There are a few reasons why Trust Deeds could be extended.
For example, if your income drops to a level that means you can no longer afford your agreed Trust Deed payments, you may have to renegotiate for even lower monthly payments. Sometimes, your lenders may suggest that four years isn't enough time for you to repay a reasonable amount of your unsecured debts, and your Trust Deed could be extended to compensate.
If you are temporarily unable to pay anything much towards your Trust Deed (e.g. due to unemployment), you may be able to take a 'payment holiday' so you can get your finances back on track. Your Trust Deed will then be extended by the length of this holiday to ensure you still make the agreed number of payments.
As part of your Trust Deed you may also be asked to release some equity from your home to help repay your debts. If, for any reason, you can’t release equity then your Trust Deed could be extended by 12 months.
In more serious circumstances, for example if your income drops too drastically with no real prospect of returning to normal, a Trust Deed may no longer be suitable for you. In this case you may have to consider alternative debt solutions.
How else can a Trust Deed change?
Along with being extended, under some circumstances a Trust Deed can be shortened.
For example, if you come into a windfall - such as a lottery win or inheritance - you may have enough to pay off your Trust Deed early. Bear in mind that during a normal Trust Deed, debt is only written off after four years because you can't afford to pay the balance in full - so if you suddenly can afford to repay your full unsecured debt, your lenders will expect you to do so.
Other things to think about
If you can't keep up with your monthly unsecured debt repayments - and you can't see a way out of your debt problem - a Trust Deed could be your best option.
There are disadvantages, though. It will stay on your credit rating for six years, for example.
Before entering a Trust Deed, it's best to get some expert advice. If you're not sure what's best for you, fill out our debt solution finder and a professional will be in touch with some Scottish debt advice.
Article Updated 12/12/2013