10 Trust Deeds Misconceptions
At Trust Deed Scotland® we speak to people every day who have been misinformed in the past about Trust Deeds and how they affect the people who enter them in order to become debt free. Below are 10 of the most common Trust Deeds misconceptions about Trust Deeds straightened out.
- You will lose your home if you enter a Trust Deed.
This used to be a problem but legislation introduced the form 1B which is addressed at the initial stages of the process, before the trust deed is finalised. It ensures a valuation of your property is done and that your property is eligible for protection, before you enter into the Trust Deed.
- Your details will be put in the newspaper if you enter a Trust Deed.
In the past, advertisements were place in the Edinburgh Gazette but this is no longer the case. All those who enter into a Trust Deed are placed on the Accountancy in Bankruptcy (AiB) Register and stay there until 1 year after your trustee discharges from the Trust Deed. Most people have never accessed this unless they work in insolvency and debt solution, so it is not as though your family or friends will come across it by accident.
- Trust Deeds and Bankruptcy/Sequestration are the same thing.
Trust Deeds and Sequestration, (Scottish Bankruptcy), have many important differences. Bankruptcy remains on your credit file and you will often be asked on application forms if you have ever been declared bankrupt which could affect your ability to obtain credit indefinitely.
Trust Deeds do not show on your credit file 6 years after entering into one. If you are a homeowner and you become bankrupt, you would lose your property, which is not the case with a Trust Deed.
Once your Trust Deed term has been completed, you would not make any further payments to your debts but with bankruptcy, depending on your income, you may have to pay into your debts after your bankruptcy has been finalised. If you enter into a Trust Deed, there are government guidelines to ensure you have enough income each month, after your Trust Deed contribution to cover your necessities.
This includes things such as: food; housekeeping; rent/mortgage; council tax; gas; electricity; home insurance; life insurance; telephone; internet; television and other expenditure. The guidelines with bankruptcy are much more stringent and you would lead a heavily restricted lifestyle. You also need to pay £200 to apply for bankruptcy, whereas all Trust Deed fees are included in the agreed monthly contribution.
- Your family, friends or employer will find out you are in a Trust Deed.
In the majority of cases, you don’t need to tell anyone at all you’re entering a Trust Deed if you don’t want to. The exception is, people in certain lines of work, (usually positions of high authority or financial responsibility), check your contract and terms of employment or HR department if you are unsure if this applies to you.
- Your income is too high or low to enter a Trust Deed.
Each Trust Deed is considered on a case by case basis. Your income and expenditure, debt level and who your creditors are can all play a part in the process. If your disposable income is high, you may pay a larger contribution than some other people but in the majority of cases, this contribution is still vastly less than what you would be paying prior to entering a Trust Deed, all interest and charges would be frozen and you would write off a percentage of your debt.
If you are a low earner you can still qualify if someone you know can act as third party to ensure the contribution will be met each month. Once you discuss your personal circumstances with a debt advisor, they can give you an indication of what to expect. The majority of cases we deal with do not have any problems relating to this.
Try the Trust Deed Wizard to see how we could help you turn your finances around.
- You won’t be able to get credit in the future if you’ve been in a Trust Deed.
You won’t be able to get credit while you are in the Trust Deed but once you complete your agreed Trust Deed term, you can begin applying for credit again and rebuild your credit history.
The Trust Deed will show on your credit file for 6 years in total, (from the date it was entered). As most Trust Deed terms are 48 months, this means it would show on your credit file for 2 years after you are discharged from your Trust Deed. During this two year period you may find it more difficult to obtain credit but you can begin rebuilding your credit score. See our blog, How Trust Deeds Affect your Credit Rating, for advice on how to rebuild your credit score.
- You would have to give up your mobile phone, Sky/Virgin/Netflix television and other direct debits in other to enter into a Trust Deed.
As stated earlier, when people enter into their Trust Deeds, there are government guidelines in place to ensure you can cover your monthly necessities and your Trust Deed contribution. As long as your outgoings stay within these guidelines, you will not have to cancel any of your direct debits. Only excessive expenditure is not permitted as it would suggest you could contribute more to your debts.
- Entering a Trust Deed is something to be embarrassed or ashamed about.
This is simply not the case. Although you may feel like you are the only person you know struggling with debt, we help thousands of people each year. The chances are you know or have come into contact with many people who are in a Trust Deed but you simply didn’t know it.
We’ve already given advice to over 20,000 people in Scotland, for over a decade. People get into problems with debt for many different reasons and the fact you are accepting that you need some help and want to get your finances turned around shows you are responsible and committed to changing your life for the better.
- You can shop around to find the lowest Trust Deed contribution.
Your Trust Deed contribution is calculated based on what your debt level is, what your creditors will accept and the amount of disposable income you have. This figure will not change based on what company you deal with as they are all working within the same government guidelines.
The importance of what company you choose lies in the training and quality of the debt advisors and how much support you will be given throughout the process. Our advisors are here to help every step of the way from the second you pick up the phone to when you complete your Trust Deed.
- Entering into a Trust Deed would affect the credit of others living in your home.
Trust Deeds are an individual process and only affect you. The only way it may affect your partner is if you have joint debts. Otherwise, it will have no effect whatsoever on the credit history of anyone else living in the property and they needn’t even know you are in a Trust Deed as all correspondence will be confidential.
We hope that reading our 10 Trust Deeds Misconceptions guide has helped to appease any anxieties that you may have about whether you would be eligible for a Trust Deed.