How long does a Trust Deed last?
A Trust Deed usually lasts for four years after it has been agreed with your lenders.
How is a Trust Deed started?
You may be eligible for a Trust Deed if you are a resident of Scotland and have unsecured debts of £5,000 or more, or joint debts of £10,000 or more. You must also be unable to afford your monthly unsecured debt repayments - and can't see yourself being able to repay your total unsecured debts in a reasonable amount of time. You should, however, be able to pay off a reasonable amount of your total debt with smaller payments each month.
A Trust Deed is a legal process, so it will be overseen by a qualified Insolvency Practitioner - your Trustee. You'll work with them to decide how much you can afford towards your payments each month by creating a budget, and seeing how much you have left over after essential expenses. If at least half of your lenders who are responsible for at least a third of your debt agree, your Trust Deed will become a Protected Trust Deed. This will guarantee that your Trust Deed will be legally protected for its entire term, as long as you continue making payments as agreed.
Unless enough of them object, your Trust Deed will become a Protected Trust Deed. This will guarantee that your Trust Deed will be legally protected for its entire term, as long as you continue making payments as agreed.
Does a Trust Deed always last four years?
Not always. There are certain circumstances that would extend or shorten your Trust Deed.
If your income drops
If your circumstances take a short-term change for the worse and you can't meet your Trust Deed payments for a while, you may be allowed to take a 'payment holiday'. This would give you a break from your Trust Deed while you try to get back on track. Taking a payment break would extend your Trust Deed by the length of the break - you'd basically keep on making payments for a few months after the date your Trust Deed was expected to finish.
If you suddenly come into a lot of money
If you come into a fair bit of money (an inheritance, for example, or even a lottery win) during your Trust Deed, you may be able to repay your debts in full.
You must repay your full debt if you are able to: your remaining debt would only be written off after three years if you can't realistically afford to repay it.
If your income rises
If your income rises, you would probably be required to make larger payments (though your Trustee would still make sure that they are affordable to you).
If your original debt was relatively low and your rise in income is substantial, you may be able to repay the full amount you owe earlier than expected.
Other things to think about
A Trust Deed could be a great help to somebody who cannot see a way out of their unsecured debts. It does come with disadvantages, however - like the impact it'll have on your credit rating for six years.
If you own a house, you may also be expected to release equity in it, so that you can offer your lenders more. If you can’t release any equity then your Trust Deed can be extended by 12 months.
Taking part in a Trust Deed is a big decision. If you're not sure about your options, fill in our fast-track call back form. A friendly debt professional from Wilson Andrews will be in touch to talk about the best course of action for you.
Article Updated 12/12/2013