What happens when a Trust Deed finishes?
When your Trust Deed comes to an end, your trustee will issue a 'letter of discharge'. A copy of the letter will be sent to Accountant in Bankruptcy (AiB - Scotland's Insolvency Service) and the Register of Insolvencies will record your discharge.
If you enter a Trust Deed, chances are you'll finish it in 48 months, as long as it all goes according to plan. Over those four years, you'll have made 48 monthly payments - and this will count as 'full and final settlement' of the debts included in your Trust Deed.
So, any unsecured debt that you weren't able to repay during your Trust Deed will be written off: you actually won't be required to repay it anymore.
'When you are discharged from a protected trust deed, you will be discharged from any outstanding debts which were due at the date you signed your trust deed. This means that your creditors are no longer allowed to pursue money that was owed to them when you signed the trust deed.'Accountant in Bankruptcy - Trust Deed guide
However, some debts won't be written off. Any unsecured debt that wasn't included in your Trust Deed, for example, won't be written off - and neither will any secured debts you have, or any student loan debt you're carrying.
What happens to my secured debts at the end of my Trust Deed?
If you owe money that's secured against property, it won't be included in your Trust Deed at all - your secured lenders won't be asked whether or not they agree to your Trust Deed, and they won't write off what you owe them, whether you finish your Trust Deed or not.
Throughout your Trust Deed, in fact, it's up to you to make sure you make all your payments towards your secured debts. Having said that, the fact that you're in a Trust Deed should make them easier to make, since your Trust Deed payments would be calculated not to take up any funds you need for life's essentials - not just your mortgage, but also food costs, petrol, utility bills, and so on.
A Trust Deed can affect your mortgage in another way, though. If you're a homeowner, you might be required to release some equity from your property, so you can repay your unsecured lenders more of what you owe them before they write off the rest.
You might find, however, that the impact of your Trust Deed on your credit rating makes it harder to release equity: mortgage providers can see that you've entered a Trust Deed, so you might find that it's harder to get a new mortgage deal, or that you're charged a higher rate of interest if you do. If you can’t release any equity then your Trust Deed could be extended by 12 months.
Article Updated 12/12/2013