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What are the benefits and consequences of a Trust Deed?

Trust Deed | Guide

The benefits:

  • You'll know when you've repaid your unsecured debts, as long as you stick to the terms of the Trust Deed. Typically, a Trust Deed lasts for four years
  • You'll only have one, reduced payment to make per month. This payment will be designed to fit into your monthly budget, as it'll be calculated after all your essential outgoings, such as your rent or mortgage, food, utilities and travel costs have been taken into account
  • You'll be protected from any further legal action from your unsecured lenders
  • You could avoid some of the more serious consequences of bankruptcy
  • You'll have your remaining unsecured debt written off upon successful completion of the Trust Deed, usually after four years

The consequences:

  • If you're a homeowner, it's likely that you'll have to release some of the equity in your home to repay your debts. If this is not possible your Trust Deed may be extended by 12 months
  • If you own other valuable assets, you may be expected to sell them and use the proceeds to reduce what you owe
  • You won't be able to take out any further credit whilst your Trust Deed is in progress and there will be restrictions on your expenditure
  • During the Trust Deed, you must declare any inheritance, bonuses, overtime or windfalls. You’ll be expected to pay some or all of this into your Trust Deed
  • A Trust Deed will show up on your credit history for six years from the date it starts, which will make borrowing money during this time difficult and/or more expensive
  • You could be made bankrupt if you fail to stick to the terms of your Trust Deed and it ends up failing
  • Signing a Trust Deed can affect your membership of some professional bodies and some employers, e.g. financial institutions, might not allow people who have signed a Trust Deed to apply for membership, work for them or hold certain positions. You should check if your employment could be affected before signing a Trust Deed

Next: How will it affect my mortgage?

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