What is a Trust Deed?

9 October2009

A Trust Deed is a legally binding agreement with your unsecured lenders. Basically, if you can reach an agreement with enough of your lenders:

  • you will agree to repay as much of your debt as you can over a certain time (in most cases, three years), and
  • they will agree not to take any action against you, not to contact you about your debts, and to write off any outstanding unsecured debt once you`ve completed your side of the agreement and your Trust Deed has come to a successful conclusion.

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But Trust Deeds aren`t for everyone. First of all, they`re only available to people who live in Scotland, who can`t afford to repay their unsecured debt within a reasonable time, but who can afford to make regular monthly payments towards their debt.

Plus, it`s important to recognise that entering a Trust Deed will have a serious effect on your credit report for six years - you`ll find it more difficult and/or expensive to obtain further credit during the first three years after your Trust Deed has finished.

Having said that, completing your Trust Deed will also mean your unsecured debts will be gone. If you hadn`t entered a Trust Deed, you`d probably still owe your unsecured lenders money six years from now - and your financial situation might well have grown even worse by then.

Be aware, though, a Trust Deed is a big financial commitment, and if you`re a homeowner you`ll also be required to release any equity in your property.

If you`re not sure you can commit to making your monthly payments, a Trust Deed isn`t for you. If you fail to keep up with your payments, you creditors will be able to start legal action against you, such as petitioning for your sequestration (bankruptcy).

Is a Trust Deed right for me?

If you can answer `yes` to the following questions, a Trust Deed might be a good way of clearing your debts.

  • Do you owe a lot - approximately 10,000 or more - to multiple unsecured creditors?
  • Are you unable to make your monthly repayments towards those debts?
  • Do you live in Scotland?
  • Is your income reliable enough to let you commit to making regular monthly payments to your debts for the next 3 years?

However, this doesn`t necessarily mean a Trust Deed is the best approach to your debts. You`d need to discuss your situation with an expert, who could explain the full implications of entering a Trust Deed and help you decide if you`d like to go ahead, or if you`d like to look into other ways of clearing your debts.

For more on Trust Deeds, click here for a free call-back or call an expert on 0800 195 2911.

Tags: debt, trust, deed, trust deed, scotland, debt scotland, debt management scotland, bankruptcy scotland

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