Unfortunately, it’s all too easy to find yourself in debt and you’re not alone. Often, it’s tempting to bury your head in the sand and hope your problems will go away – but debt isn’t a problem you can just ignore, with interest charges stacking up, the longer you do, the worse your financial situation will get.
For people struggling with debt, there are a number of debt solutions to turn to. The first step is to talk to an expert debt adviser who you can talk through your options with.
One of the options available to residents of Scotland is a legal agreement called a Trust Deed.
What is a Trust Deed?
A Scottish Trust Deed is a voluntary legal agreement between you and the companies you owe money to. When you enter into a Trust Deed, your total debts are all grouped together and a Licensed Insolvency Practitioner takes on the role of a trustee.
By grouping all of your debts together your trustee will help you to find an amount you can realistically, afford to pay towards your debts. This will become one monthly payment replacing all of your existing payments. Because this amount is based on what you can reasonably afford it is usually significantly lower than your previous combined payments.
You’ll make this payment once a month, for 48-60 months depending on circumstances months. At the end of this time, any remaining, qualifying, unsecured debts will be written off. Legally, your creditors can no longer pursue you for the remaining amount leaving you debt-free.
Almost all unsecured debts are eligible to be included in a Trust Deed, such as; credit and store cards, personal and payday loans, overdrafts, old council tax and old utility bills, catalogues and old HMRC debts.
Advantages of a Trust Deed
- Your debt becomes manageable. You will only make one monthly payment to your Trust Deed rather than several payments to several companies. This monthly amount will be based on what you can realistically afford and is therefore usually, significantly lower. You can agree on a regular date to repay the money you owe, for a time that suits you best – after payday for example.
- No further action. If the majority of your creditors don’t object to the Trust Deed terms it will become ‘protected’ meaning as long as you stick to the agreed terms they can’t legally take actions such as arresting your bank account to recover money and you can protect your house and car.
- No direct contact from your creditors. Your Licensed Insolvency Practitioner will take on the role of trustee, who is there to help you to repay your debts. As long as you make the reduced monthly payment, with Protected Trust Deeds your creditors can no longer call you up, email you or contact you directly in any way.
- Your future interest charges can be frozen. After signing a Trust Deed, you’ll be paying back the debt you already owe but not racking up any more debts as you go.
- Debt free in 48-60 months. At the end of your Trust Deed period, any remaining qualifying, unsecured debts will be written off. Legally, your creditors can no longer pursue you for the remaining amount leaving you debt-free
Are there any disadvantages of a Trust Deed?
Before considering a Trust Deed, there are some things to be aware of:
- You must be able to make the agreed monthly payments towards your debts unless your circumstances change. If they do you need to inform your trustee immediately
- If you gain any new money or assets such as PPI payments, tax rebates or inheritance during your Trust Deed period your trustee can claim them towards your debts
- A Trust Deed will negatively impact your credit rating for 6 years from the date you start one, making it more difficult to obtain credit such as a mortgage
- Usually, you can’t be a director of a limited company. If you are self-employed you may have to appoint a new director or sell your business.
Is a Trust Deed right for me?
If you are thinking of setting up a Trust Deed you should seek advice first, remember you should never pay for this advice, we offer confidential, ethical advice for free. You should also consider whether you have enough disposable income to afford the monthly repayments. If you’re not sure, it’s something we can help you with.
A Trust Deed could be a good option if you:
- Have unsecured debts of £5,000 or more
- Have enough income left after paying your bills each month to make a contribution towards your debts
- Want to be debt free after 4 years
You may need to consider a different route if you:
- Have no disposable income to put towards your debts and no assets
- Have debts that don’t exceed £5,000
- Have enough disposable income to pay off your debts before 4 years
For more information see out Steps to a Trust Deed page.
How can we help you?
From our feedback, we know people often feel too embarrassed to take that first step and talk about their debt. There’s no need to feel embarrassed and struggle alone;
At Trust Deed Scotland, we’re one of the largest FCA approved, debt advice company in the country. We offer, free, non-judgemental and 100% confidential advice to people living in Scotland and struggling with debt.
If you think you may not qualifytrsust for a Trust Deed we can talk you through the other options available to you. We’re a Not-for-Profit Community Interest Company so will always give you advice suited to you, with your best interests at heart. It is our mission to help you get out of debt rather than sell you a solution.
Our experienced team of debt experts ae DRF trained and have helped over 16,000 Scottish residents out of debt. Don’t just take our word for it check out our Trustpilot reviews where we currently have a rating of 9.9/10.
If you want to start the journey to a debt-free future, or just want a friendly chat and some advice give our team of experts a call. Or, you can try our Trust Deed Calculator now to find out if you’re eligible in 60 seconds.