Trust Deed - FAQs

  1. What is a Trust Deed?
  2. How do I set up a Trust Deed?
  3. Why does a Trust Deed require an Insolvency Practitioner (IP)?
  4. Why would I want a Trust Deed?
  5. Why would my creditors accept a Trust Deed?
  6. How much will it cost me?
  7. What if I default on a monthly payment?
  8. I'm a homeowner - what will happen to my home?
  9. Does a Trust Deed always last for 3 years?
  10. What happens once the Trust Deed is over?
  11. Will a trust Deed affect my ability to get credit?

1. What is a Trust Deed?
A. It's a legally binding agreement between you and your creditors: you agree to repay what you can afford for an agreed period of time (normally 3 years), and they agree not to take any further action against you. Upon successful completion you will have no further liability to repay any balance of the unsecured debts included in your Trust Deed.

If your creditors do not object to your Trust Deed, it will become protected, which means neither you nor they are allowed to change your minds.

A Trust Deed can only be set up with the help of a licensed Insolvency Practitioner (IP).

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2. How do I set up a Trust Deed?
A. There are four steps involved in setting up a Trust Deed through All About Money.

Step 1
Call us. One of our advisers will discuss your financial situation with you. If it looks like a Trust Deed is the best solution for you, they will discuss your creditors, income and expenditure with you, so we can calculate how much you can afford to pay every month after you've allowed for your secured debts and essential living expenses.

Step 2.
You can have a face-to-face meeting with one of our representatives in the comfort of your own home, or we can discuss the process over the phone. We'll go through the whole process with you, answer any questions you may have and make sure you understand and approve of the Trust Deed proposal we've drawn up for you.

Step 3.
We'll provide your unsecured creditors with details of your Trust Deed proposal. We will also advertise the details in the Edinburgh Gazette. This gives your creditors the opportunity to object to the Trust Deed within the time allowed.

Step 4.
5 weeks later, your Trust Deed will become protected by law, unless there are objections from more than half of the creditors - or from creditors who collectively 'own' more than a third of your debt. As long as you keep up the payments, you WILL be debt free when it's finished (in most cases, 3 years from the day it begins).

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3. Why does a Trust Deed require an Insolvency Practitioner (IP)?
A. A licensed Insolvency Practitioner (IP) is a person (often an accountant or solicitor) who has the experience and qualifications to act in formal insolvency cases.

Your IP is responsible for presenting your Trust Deed to your creditors, ensuring that it takes into account their interests as well as yours, and overseeing the Trust Deed until it is successfully completed.

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4. Why would I want a Trust Deed?
A. A Trust Deed offers various benefits, but the ones which attract most people are:

1) Reduced pressure about legal action from their creditors
2) Monthly repayments tailored to their individual circumstances
3) A clear date when they KNOW they will have repaid their debts
4) A dedicated point of contact for expert help and guidance

What's more, it can deliver these benefits without many of the drawbacks that come with bankruptcy / sequestration: there's no court process involved; if you're a homeowner you won't have to sell your home; and a Trust Deed won't disqualify you from certain jobs in the way sequestration does.

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5. Why would my creditors accept a Trust Deed?
A. They know that they'll probably get more money back than they would if they pushed for an alternative such as bankruptcy - they know the Insolvency Practitioner (IP) will examine your finances closely and ensure that the Trust Deed takes their interests into account as well as yours.

Plus, a Trust Deed avoids the need for expensive, time-consuming legal action.

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6. How much will it cost me?
A. It's different in every case, as it depends on how much you can afford to pay every month after allowing for your priority debts and day-to-day living expenses (your lenders might ask you to reduce your spending on non-essentials if they think it's unreasonably high in some areas). If you're a homeowner, you may also be required to release some of the equity in your home, to increase the amount of money made available.

All fees and costs will be deducted from the payments you make - and you (and your creditors) will know exactly what you would pay (or receive) before you commit yourselves to the Trust Deed.

Click here to find out more about our fees

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7. What if I default on a monthly payment?
A. It depends. The Trust Deed may be extended, giving you some time to catch up with missed payments.

If it's clearly not your fault (if you're made unemployed, for example, or suffer a drop in salary) your monthly payments will be reassessed and may be amended.

However, if it appears that you're simply not co-operating, the Trust Deed will probably be terminated - which means your legal protection will cease and you will once more be faced with handling your debts yourself or finding an alternative professional debt solution.

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8. I'm a homeowner - what will happen to my home?
A. You may be required to release the equity in your home, to increase the amount you can pay your creditors. Please note that a Trust Deed covers unsecured debts only: it will not affect your secured debts in any way, so you will have to continue paying for your mortgage and any debts secured against your home.

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9. Does a Trust Deed always last for 3 years?
A. In most cases, but not always. Under certain circumstances, it may be extended.

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10. What happens once the Trust Deed is over?
A. Once your creditors have received all the funds as laid down in the Trust Deed proposal, that's it - it counts as full and final settlement of your debts. In other words, any outstanding debt is legally written off, and you are officially free of all the unsecured debt that is included in your Trust Deed. Any unsecured debt not included will remain outstanding.

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11. Will a Trust Deed affect my ability to get credit?
A. Many people considering a Trust Deed feel that they'll never want to borrow again, but this is still an important question.

During the term of the Trust Deed, you will not be able to obtain credit over 250 without telling the creditor about the Trust Deed.

After your Trust Deed has finished, it will remain on your credit rating for three more years, and this may make it more difficult (but not impossible) to obtain credit.

However, your credit rating will also show that your debts have been cleared, which probably would not have happened if you hadn't entered into a Trust Deed. Indeed, they might well have grown instead.

So although a Trust Deed does damage your credit rating, it can be much less damaging than the alternatives, including sequestration (or doing nothing). Plus, six years after the Trust Deed starts, your credit rating will contain no mention of it - or of the debts you're facing today.

Get expert Trust Deed adviceIf you would like more information, talk to our team today.

Speak to an expert debt adviser on:0800 195 2911

Apply for help online

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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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