Will I lose my house if I enter a Trust Deed?
If you cannot afford your monthly unsecured debt repayments - and you don't see yourself being able to repay your unsecured debts in a realistic amount of time - a Trust Deed could help. You must, however, be able to commit to smaller monthly payments.
There are disadvantages to a Trust Deed. If you are a homeowner, it is likely that you will be expected to release equity in your home during your Trust Deed. However, it is unlikely that you will have to sell your home, as long as you keep up with your mortgage payments. You should also be aware that if you can’t release any equity from your home then your Trust deed can be extended by 12 months.
Another disadvantage is the fact that a Trust Deed will have a negative impact on your credit rating for six years.
It is worth remembering, however, that not getting help with your debts could also have serious consequences if you're in the kind of situation where a Trust Deed could be appropriate.
What are the advantages of a Trust Deed?
Despite its disadvantages, a Trust Deed can still be a very good form of Scottish debt help. The advantages include:
• You will make just one payment per month towards your unsecured debts, which will be distributed among your lenders as agreed.
• Although you may have to release equity, your Trust Deed payments would be designed to fit around your essential monthly living costs, such as your mortgage or rent, bills, food and petrol.
• When you have successfully completed the Trust Deed, usually after fouryears, your remaining unsecured debts will be written off.
• If at least half of your lenders who are responsible for at least a third of your debt agree, your Trust Deed will become protected - and your lenders will be unable to take any further legal action against you as long as you stick to the terms of the Trust Deed.
• It can help you deal with unmanageable unsecured debts without resorting to bankruptcy.
• You will benefit from the help of an expert Insolvency Practitioner, who will help you negotiate with your lenders and guide you through the process.
So is a Trust Deed worth it?
Although a Trust Deed may require you to release equity in your home, most people see this as preferable to having to sell their house altogether. If you're really worried about your debts, it is best to take action sooner rather than later - if your debt problems keep on getting worse, you'll probably find it's harder to tackle them later on.
Trust Deeds are not the best debt solution for everyone. If you want to know which debt solution might be best for you, fill out our debt solution finder, and a debt expert will be in touch with some friendly, professional advice.
Article Updated 12/12/2013