The truth about bankruptcy
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A Trust Deed is one way for Scottish residents to deal with problem debt. Learn more here.
A Trust Deed is a formal debt solution available in Scotland. It will only be suitable for certain people, but in the right circumstances it can offer some people a way out of problem debt and the chance to build a secure financial future.
In this blog, we’re going to explain the details of how Trust Deeds works and how you can find out whether this solution is right for you.
Individual Voluntary Arrangements are available in the rest of the UK and offer similar benefits to a Trust Deed.
How can a Scottish Trust Deed help me?
A Trust Deed allows someone in debt to reduce their monthly payments to their unsecured lenders. You don’t pay your unsecured lenders individually on a Trust Deed – you pay your solution provider one affordable payment each month and your lenders receive a portion of this on a pro rata basis, at intervals throughout the Trust Deed.
A Trust Deed normally lasts for four years, and after that time, as long as you have kept to the rules of the agreement, the rest of your unsecured debts included on the plan are written off.
A Trust Deed can help someone struggling with unmanageable debts by cutting their monthly payments and then writing off the rest of their debts when it’s finished.
Is a Trust Deed right for me?
A Trust Deed may be right for you if you can afford to pay something towards your debts each month but you can’t afford to repay everything that you owe. It’s a formal way to deal with insolvency, which means that you can’t afford to pay your debts when they are due, or that your assets are worth less than your debts.
You need to be able to put something towards your debts each month with a Trust Deed. If you can’t afford to do this, another solution may be more suitable for you.
A Trust Deed may also be right for you if you’re a homeowner, as starting this solution will not result in you having to sell your home, as long as you comply with the terms of your Trust Deed. You may have to remortgage and release the equity so this can be put towards your debts, or if you can’t do this, you may have to continue your payments towards the Trust Deed for up to another 12 months. All the rules surrounding equity release will be explained to you by your solution provider.
A Trust Deed won’t be right for everyone, and if it isn’t right for you there will be another way to tackle your debts. You can read more about the other debt solutions, or you can take our money smart report below.
The report will show you what’s going on with your finances at a glance and which debt solutions you can consider.
Are there any downsides?
There are upsides and downsides to all debt solutions. One thing you need to remember is that a Trust Deed will have an impact on your credit history. Your credit history shows how you’ve managed your debts and starting a debt solution will show up on here.
This means that if a lender or service provider credit checks you, they will be able to see you’ve been on a debt solution. This may decide not to lend to you, provide a service to you or borrowing may become more expensive than it otherwise would have been.
It is possible to improve your credit history after a debt solution, have a look at our previous blog to find out how to do this.
A Trust Deed is a formal way to deal with insolvency, and all insolvencies are recorded on the Register of Insolvencies. This is a publicly available register and will record your details for however long your debt solution lasts and for three months afterwards. Although it is public, it is mainly used by creditors and people actually involved in the running of your solution.
Get help with your debts
Now you know what a Trust Deed is, the next step is for you to speak to a debt expert so you know whether it’s the best option for you. You can do this by contacting one of our advisors using the options at the bottom of the page. There are fees for some solutions once they’re up and running but the initial advice we give is always free of charge.
by Christine WalshBack to blog home