Trust Deed Pros and Cons

A Trust Deed could be the best possible way for you to put your debts behind you - but there are some drawbacks you'll have to consider if you're wondering whether it's the right move. Here's our guide to the pros and cons of Trust Deeds.

Pros of a Trust Deed

  • Debt write-off. When your Trust Deed comes to a successful conclusion, any outstanding unsecured debt will be written off.
  • Legal protection. Your unsecured lenders will not be able to take any action against you as long as you stick to the terms of your Trust Deed. They won't be able to take you to court, for example, ask for higher payments, or try to make you bankrupt.
  • Affordable payments. Your monthly payments into your Trust Deed will be calculated to be affordable after you've made all your essential payments (e.g. mortgage/rent, utility bills and food costs).
  • Clear timeline. When you enter a Trust Deed, you'll know exactly when it's due to finish - and as long as you keep your side of the agreement, your unsecured debt will be cleared at the end of it.
  • Can help you stay in your home. You're unlikely to lose your home because you've entered a Trust Deed (something which could well happen if you enter bankruptcy). In fact, a Trust Deed should help you stay in your home, since your payments would be calculated to leave you with money for your essential monthly costs - including your mortgage / rent payment.
  • No statutory effect on your career. Entering a Trust Deed wouldn't place any 'statutory restrictions' on your career (as bankruptcy would), although there may be certain positions you cannot hold.

Cons of a Trust Deed

  • Approval required. A Trust Deed won't go ahead if more than half of your unsecured lenders - or lenders who collectively account for over a third of your unsecured debt - object to it.
  • Commitment required. If you can't realistically commit to making regular payments, a Trust Deed won't be an option.
  • If your Trust Deed fails, you may be made bankrupt.
  • Equity release. If you're a homeowner, you may have to release some of the equity in your property so you can repay your lenders more of what you owe them.
  • Effect on borrowing. You won't normally be allowed to take out any further credit while your Trust Deed is ongoing - unless it's something essential, like a remortgage.
  • Effect on credit rating. A Trust Deed will stay on your credit report for six years, potentially making it more difficult to access further credit in that time. Since the typical Trust Deed lasts for three years, this means it could still be an issue for the three years that follow.
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Subject to eligibility and acceptance. Fees Payable. Debt write off applies only to unsecured debts on completion of a Trust Deed, alternative solutions may be offered. If your Trust Deed fails, it could lead to Bankruptcy. Your ability to obtain credit will be affected for 6 years. Homeowners may be required to release the equity in their property. Calls may be recorded. Calls from UK landlines are usually free, but you should check with your network provider for full details of your service.

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