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Will I be able to get credit after a Trust Deed?

Do you have at least £5,000 worth of unsecured debt (or £10,000 worth if it’s joint debt), e.g. personal loans, overdrafts and credit cards? Are you unable to repay everything you owe in a reasonable amount of time?

If you answer 'yes' to both of these questions and you also live in Scotland, a Trust Deed could provide an appropriate way of dealing with the problem.

Yet while it's important to think about how a debt solution will affect you while it's in progress, it's also important to consider the after-effects - and what impact it will have on your finances further down the line.

So, with this in mind, we're asking: will you be able to get further credit once a Trust Deed finishes?

What is a Trust Deed?

A Trust Deed is a formal insolvency solution - designed as a way out of significant unsecured debts that can't be repaid within a reasonable amount of time.

To become 'Protected' - meaning it's a legally-binding agreement - a Trust Deed must be agreed by the majority of your lenders: more than 50% of your lenders who hold more than a third of your debt between them

You can find out more Trust Deed facts by clicking here.

How does a Trust Deed work?

The basic idea of a Trust Deed is that you'll repay as much as you can afford - and your lenders will write off the portion of the unsecured debt you can't afford to pay back once your Trust Deed comes to a successful end.

Once you enter a Trust Deed, you will:

• Make one payment per month towards all your unsecured debts, calculated to be affordable on top of your other essential outgoings (e.g. rent/mortgage, bills & food).

• Prevent your lenders taking any further action against you

• Be able to stay in your home (but you may have to release some of the equity if you're a homeowner)

• Have any remaining included debt written off on successful completion.

A Trust Deed usually lasts for four years. Once it's successfully ended, you'll be free of your unsecured debts.

Will I be able to get credit after a Trust Deed?

If you decide to apply for further credit, you could struggle, even after your Trust Deed has come to an end. This is because a Trust Deed will affect your credit rating for six years after it starts - and many lenders will consider you too much of a 'risky' customer to lend to.

Having said that, you could improve your credit rating over time simply by keeping on top of all your bills and being on the Electoral Register (for example) - and avoiding borrowing altogether, unless you really need to, could prevent you falling into financial difficulties in the future.

Speak to us today to find out if a Trust Deed could be right for you.

Article Updated 12/12/2013