Trust Deeds in Scotland

Trust deeds typically last for four years, during which time you will pay an agreed monthly amount to your Trustee. Your Trustee will then use this money and split it amongst those you owe money to. Once the four years is up, the trust deed will come to an end and you will not be required to pay any more money towards the debts which were included in the trust deed; the remaining debt will be written off.

Trust deeds are legally binding on all parties, which means so long as you keep up with the agreed monthly amount to your Trustee, your creditors cannot contact you and ask you to pay more. Entering into a trust deed will stop the phone calls and letters you are receiving from your creditors which can be a huge relief and source of anxiety to many.

Trust deeds are only available for those that live in Scotland and have unsecured debts of at least £5,000. Creditors must agree to the terms of the proposed trust deed before it can be made legally binding (or ‘protected’), therefore you must have enough surplus income to be able to afford to make a monthly contribution towards your debts; if your creditors are not satisfied with the repayment amount you can offer, you may need to consider an alternative debt solution such as sequestration. Your Scotland Liquidators adviser will be able to identify the most appropriate option based on your own unique circumstances.

The vast majority of unsecured debts such as credit cards, store cards, overdrafts and personal loans can be included in a trust deed and consolidated into one affordable monthly repayment amount.

There are some debts, however, which you will not be able to include in your trust deed. These include mortgages, student loans, hire purchase agreements, court fines, and any court-ordered obligation to pay child support. If you have any of these debts, you will need to continue paying this as normal alongside your trust deed.

As with any formal debt solution, there are both positives and negatives to consider before you go ahead. Your Scotland Liquidators adviser will be able to talk you through these in more detail and answer any specific questions you may have; you should only enter into a trust deed following expert advice.

Advantages of a trust deed

• You will be able to keep your home although you may need to remortgage to release some of the equity depending on how much the property is worth compared to the size of any outstanding mortgage
• Entering into a trust deed is unlikely to affect your job
• Creditors will stop contacting you
• Your debts will be consolidated into one manageable monthly repayment
• Any debt which remains unpaid once the trust deed comes to an end will be written off

Disadvantages of a trust deed

• You cannot include all debt in a trust deed. This means you will be obliged to continue paying these excluded debts alongside the monthly trust deed amount
• You may be required to release some of the equity tied up in your home
• You can be made bankrupt if you do not keep up with the terms and monthly repayment of your trust deed
• Creditors must accept your trust deed proposal in order for it to become a ‘protected’ trust deed and therefore legally binding
• Your credit rating will be affected and your trust deed will be entered into The Register of Insolvencies which can be searched by the public

When proposing a trust deed to creditors, a careful balance has to be struck between offering an amount which is large enough to keep your creditors happy, while also being low enough so that you can afford to make this payment every month.

The amount you will have to contribute towards your debts through a trust deed will depend on a number of factors including the level of your debts and amount of your surplus income. The key thing to remember is that trust deeds are designed to be affordable and certainly less than the amount you are currently paying towards your debts.

Your adviser will work alongside you to understand your current budget and use the figures to propose a monthly repayment amount which is agreeable to both you and also your creditors.

If your circumstances change during your trust deed, such as redundancy, a promotion, a reduction in your working hours, or any other financial or lifestyle change, you must contact your Trustee and let them know. Your monthly repayment amount may be amended to take into account your new situation; this could be either an increase or a decrease depending on your circumstances.

For those who are suitable for a trust deed, it can offer a way out of personal financial difficulties and the chance for a fresh start after the four years are over. Trust deeds, however, will not be the best solution for all, therefore taking expert debt advice to identify the most appropriate option is vital.