Could my interest be frozen on a Trust Deed?
Often, when people find themselves in financial difficulty, they realise they can no longer afford their debt. If you begin missing payments, interest and charges will be added - something which can send borrowers into a spiral of debt that just keeps on growing.
A Trust Deed is one way to regain control of the situation. If you qualify, you could find the interest and charges on your unsecured debts frozen.
A Protected Trust Deed
Interest and charges are frozen on any debts you include in a Trust Deed if at least 50% of your lenders who are responsible for at least 33% of your debt agree to you starting one. Once it has been agreed, lenders can't take any further legal action - as long as you keep up with your repayments.
A Protected Trust Deed usually lasts four years. Over that time, you make repayments of as much as you can afford alongside your other essential expenses. The amount you repay is decided at the start of the Trust Deed and your payments are reviewed annually.
How it works
On a Trust Deed, you'll make agreed monthly payments to your Insolvency Practitioner (the person overseeing your Trust Deed), who will then pass on the agreed amounts to each of your lenders.
You'll be expected to pay as much as you can afford throughout the agreement. This normally goes on for four years.
Before you start a Trust Deed, you'll be asked whether you're a homeowner. If you are, it may be agreed that you will free up some of the money you've put into your home at the end of the agreement. This is a process called 'equity release'. If you find that you can’t release any equity you may find that your Trust Deed will be extended by 12 months.
When you successfully complete the Trust Deed - which usually takes four years - the rest of the debt included in the Trust Deed is written off. You'd have no more responsibility for those debts and lenders would not be able to ask you for any further payment.
It's up to you whether you want to borrow money again after insolvency. You might find you are charged more interest on credit cards or personal loans for a while, as a Trust Deed stays on your credit record for six years.
Speak to a debt expert
Wilson Andrews specialise in debt solutions for struggling borrowers who need some help to get back in control of their finances. If you live in Scotland, you can turn to us for help. Request to speak to one of our advisers here.
Article Updated 12/12/2013