If you live in Scotland and you’re thinking about entering into a Trust Deed, one of the most important things to understand is how much you will need to pay the people whom you owe money to every month. You may have seen ads on social media promoting Trust Deed payments at £70p/m or £20p/w but this is a misleading headline if taken completely at face value.
Whatever amount you do agree to pay, you will pay this amount for a fixed period of typically four years, after which any debt that is not paid after this time is written off. It’s therefore important for all parties that the amount agreed is affordable for you, for the duration of the Trust Deed.
The monthly Trust Deed payments you have to make are based on your disposable income. Disposable income, also called surplus income, is the money you have left each month after all your reasonable living expenses are paid. For example, if your total net income per month is £1,600 and your total living expenses per month are £1,500, your disposable income is £100 (£1,600 – £1,500 = £100)
This disposable income figure left over is the amount you have to pay the people you owe money to, which essentially becomes your Trust Deed payment. However, this is a very simple example.
Understanding which expenses you should include and how much for each expense is reasonable are important also. Trust Deed payments made into a Protected Trust Deed in Scotland have been worked out using the Common Financial Tool.
What is the Common Financial Tool?
At Trust Deed Scotland® our expert advisors will run through your living expenses with you and advise of whether they are within guidelines.
Remember, you would typically be in a Trust Deed for 48 months and would be prepared to live within a fairly attributed budget for that duration.
The guidelines were developed by representatives from the official body, the Account in Bankruptcy, alongside other recognised bodies and debt charities. This means that usually whatever expenditure you have, will be included within the common financial tool guidelines as fair and reasonable.
If you want to get started and work out what you’re Trust Deed payment is likely to become, we recommend trying our Trust Deed Wizard® tool.
What will be included as expenditure in my Trust Deed?
Essential expenditures include your mortgage or rent, utility bills and council tax bills and these will be included as expenditure in the Trust Deed ‘as they are’
Extra expenditure allowances are also built in to cover the costs of looking after dependent children.
The guidelines used in the Common Financial Tool are based on the Living Costs and Food Survey produced by the Office for National Statistics for the UK government. Your expenditure during a Trust Deed may be limited to a lesser extent. However, you and your family will be able to manage financially on the expenditure allowances provided.
Most other types of outgoings are subject to the guidelines used in the Common Financial Tool. These expenditure guidelines assign varying maximum and minimum amounts which are deemed ‘reasonable’ according to your unique family circumstances. Your food allowance will be higher for a couple than it would be for an individual.
In addition to food, other examples of these expenditures include sport and leisure activities, TV and internet, hairdressing, newspapers, and insurance.
How to calculate a Trust Deed Payment when you’re paid weekly?
If you receive any of your income weekly, four weekly or fortnightly, the amount you pay will need to be converted into a monthly repayment figure.
If you’re paid weekly, your Trustee does this by multiplying the weekly amount by 52 (weeks of the year) and then dividing that figure by 12 (months of the year).
If you’re paid in a four weekly cycle, you will multiply the 13 4 weekly cycles in a year and divide this by 12 and for fortnightly, 26 payments divided by 12 months.
Is there a minimum Trust Deed payment?
There is generally no minimum payment that are required for Trust Deeds as long as the amount you are proposing to repay is the best offer you can reasonably afford on a regular basis.
However, the amount you pay into the Trust Deed must represent both a sensible repayment to your creditors and the reasonable fees that the Insolvency Practitioner needs to deduct from your payments to pay for its maintenance cost. And remember, you should never pay any sort of upfront fees, setup fees, arrangement fees or anything else before entering into your Trust Deed.
In general speaking terms, it is unusual to start with payments which are less than £100 a month. However, just because there is an amount specified here a minimum Trust Deed payment and that’s a figure you think would be affordable; it doesn’t automatically mean that the Trust Deed is the most suitable solution for you, or that the proposal would be approved with this repayment offer.
In order to understand your situation, Trust Deed Scotland will carry out a detail examination of your income, expenditure, assets, total amount of unsecured debt you have and some other factors in order to provide you with a personalised illustration of what your options are, plus the pros and cons of each.
Also, remember that the calculation for Trust Deed repayment is used for all statutory debt repayment options under the Common Financial Tool guidelines, so if you can’t afford the Trust Deed then a solution such as Minimal Asset Process may be more beneficial for your needs. Other considerations include joint debts you may have with a partner/spouse.
It’s also important for you to learn about alternative solutions, how they may affect you and to be informed of all the key facts, in order to make a balanced decision over what you would like to proceed with.
Can I haggle over my Trust Deed payment?
If you’re in financial difficulties, the appeal of saving money is always alluring.
After all, we can switch energy suppliers online, beat down our Sky TV and Virgin Media subscriptions, and play them off against one another to save money, or we can use discount and voucher codes to get money off furniture, clothes and even takeaway food.
But haggling over your monthly Trust Deed payment is not something that is possible. You’re free to speak to as many companies as you feel comfortable with, however, each company should correctly assess your circumstances and the payment amount should always remain the same, and ultimately based on what you can afford.
Instead of haggling over Trust Deed payment amounts, we would instead advise you to focus on what is more important for the duration of your Trust Deed.
FCA authorisation is imperative – Our FCA number is 820851.
Creditor Acceptance rate – At Trust Deed Scotland, we have a 99% creditor acceptance rate meaning we don’t suggest a Protected Trust Deed is if we think it may fail, and would offer alternatives.
Trust Deed reviews – We’ve got thousands of five star Trust Deed reviews.
In-House Team – Our expert, qualified staff have helped over 20,000 people since 2009. Becoming debt free is a journey. Our commitment to the quality of service we provide remains our top priority throughout your journey, from start to finish. That’s why it is important you choose the right company.
You will never be passed to another company to implement your debt solution. These are just some of the reasons we’re ranked number 1 in the category Debt Relief Service in the UK.
If you are struggling with unaffordable debt, you can call us for free, confidential advice on 0141 221 0999, or try our Trust Deed Wizard® to get started now.