How does a Trust Deed become protected?
Your unsecured lenders are not obliged to accept a Trust Deed but if over 50% of them, who own over 33% of the debt, agree your Trust Deed will become protected. This means it will be a legally-binding agreement.
If enough of your lenders do agree (or don't respond), your Trust Deed will become protected, meaning it's a legally-binding agreement.
What are the benefits of a protected Trust Deed?
The advantage of a protected Trust Deed is that your lenders cannot take any further legal action against you - as long as you stick to your side of the agreement. This means they won't be able to ask for higher payments, take you to court or attempt to make you bankrupt.
What are the other benefits of Trust Deeds?
There are a number of other benefits. For example:
- Your monthly unsecured debt repayments will be made more affordable. This is because your new payments will be designed to fit around your essential costs - like your bills, your rent or mortgage repayments, and food and fuel costs.
- When your Trust Deed is successfully completed (usually after four years) any remaining unsecured debt will be written off.
- You should be able to stay in your home, unlike with bankruptcy.
- As long as you stick to your side of the Trust Deed, you will have a clear date when you know you will be free of your unsecured debts.
What else do I need to know about Trust Deeds?
Trust Deeds are only available to residents of Scotland who can no longer afford to meet their monthly unsecured debt repayments - and doubt they will be able to repay their unsecured debts in any realistic amount of time. You must have at least £5,000 in unsecured debts, or £10,000 worth if they are joint debts.
You must, however, still be able to commit to regular repayments. It is important that you are sure you can meet your new repayments each month - because if your Trust Deed fails you could be made bankrupt.
A Trust Deed will also have a negative impact on your credit rating for six years, so you could find it more expensive or difficult to get further credit during that time. Although you should be able to stay in your home, you will probably have to release equity so you can repay more of what you owe. If releasing equity is not possible then your Trust Deed can be extended by 12 months.
If you're not sure whether a Trust Deed is right for you, fill out our fast-track call back form and a dedicated debt professional from Wilson Andrews will call you back with some advice.
Article Updated 12/12/2013