Is A Trust Deed A Good Idea?
Trust Deeds help thousands of people in Scotland manage their unaffordable debts and reduce their monthly debt repayments to an amount that they can afford to repay on a regular basis.
However, Trust Deeds aren’t a solution suitable for everyone and there are alternative debt management solutions in Scotland that can be just as effective or better. You can read more about how a Trust Deed works and the criteria here.
The decision to proceed with a Trust Deed is based on you, your affordability and what is best for your long-term financial stability, rather than whether a Trust Deed is a good idea or not. Get in touch with Trust Deed Scotland® today and you’ll receive a personalised illustration.
Affordable Monthly Repayments?
The solution(s) open to you will largely depend on how much debt you have and how much you can afford to repay on a regular basis.
If you have already defaulted on debts such as credit cards and loans, you may be familiar with income and expenditure guidelines, or budget sheets sent to you from your creditors. The same guidelines are largely available from debt charities and Money Advice websites.
These budget sheets will ask you to write down a list of your income and expenditure details and what you usually spend on priority bills such as mortgage/rent and council tax. These will also include what you spend on travel expenses per month, clothing and many other expenses
Whatever monies are leftover is known as your disposable income. These are the funds that you have leftover to repay your debts.
A debt charity service or an FCA regulated company such as Trust Deed Scotland® have the experience of advising on the acceptability criteria for these guidelines for these and can work with you to find out any hidden expenses that you may not take into account, and establish what your true disposable income is.
This is important because if you are to enter a Trust Deed, or any other form of debt management solution, you will be making a commitment to repay a regular amount over a number of years.
Where you fail to keep up the repayment of your Trust Deed, you could end up with a failed Trust Deed, ultimately leading to you being potentially sequestrated. More importantly for you, you would be no better off than when you first sought advice.
This is where the experience and trustworthiness of your debt expert is important. Trust Deed Scotland® have advised over 20,000 people since 2009 and have gathered thousands of five-star Trust Deed reviews on TrustPilot.
We pride ourselves on our commitment to compliance and training. We genuinely want the best outcome for our clients and always have their best interests at heart.
Alternatives to a Trust Deed?
The Debt Arrangement Scheme is a popular alternative debt solution available to residents of Scotland. It’s a statutory debt repayment plan which also uses legislation to allow you to freeze interest and charges and bring your debts under control.
There are advantages to the Debt Arrangement Scheme:
- Personalised debt repayment plan based on your situation
- Monthly payments will be based on what you can afford
- Interest on your debt will be frozen
- Protection against creditor action.
- Assets protected meaning you will not be asked to sell your house, or your car.
- Your Money advisor deals with creditors on your behalf.
There are also disadvantages of the Debt Arrangement Scheme:
- May last longer than the typical 48 months offered by a Trust Deed.
- Subject to certain conditions. Includes making all payments towards your Debt Payment Plan and paying your monthly expenditure and bills when they fall due. If you fail to make payments, your plan could be revoked.
- Unable to obtain credit or use an overdraft while you are in a Debt Payment Plan.
- Credit rating will be affected.
Depending on the severity of your situation, Sequestration may be the best way for you to resolve your debts. On the other hand, a debt consolidation loan or negotiating debt repayment plans directly with your creditors may also be better for you.
Advantages of Trust Deeds?
There are many advantages of a Trust Deed, a few of which are:
- Pay back what you can afford
- Your Trustee will deal with creditors on your behalf
- You will be protected against creditor action
- On the successful conclusion of a Trust Deed, your remaining debt will be written off.
- If you own assets such as a property, you agree with your Trustee in advance whether the Trust Deed affects them.
- You may be able to remain as the director of a Limited Company
Disadvantages of Trust Deeds?
- Your credit file will be updated to reflect that you have signed a Trust Deed. This information will remain on your credit file for six years.
- As a result of this, you may find it difficult to get credit for a period after your Trust Deed is finalised.
- For a Trust Deed to become protected, you must convey all your assets to your Trustee. That includes any property that you own. In certain circumstances, it may be possible to exclude your property, but you need to get clear advice on this when you speak to a debt advisor.
- As mentioned earlier, failure to keep up with repayment of your Trust Deed could result in you being sequestrated. Therefore, it is important that you re fully aware of the Pros and Cons of a Trust Deed and that the amount you repay is realistic for all parties.
Can You Have 2 Trust Deeds?
The advice here varies depending on the reason for you asking the question of can you have 2 Trust Deeds!
For example, you may have entered a Trust Deed several years ago, completed your Trust Deed term successfully, rebuilt your credit and then have the misfortune to end up with unaffordable debts for the second time in your life.
This isn’t unheard of in Scotland, where we’ve had a series of recessions over the last couple of decades, and of course, people can suffer ill-health or changes to their circumstances more than once in their lives. We’re all now aware of the lifechanging ‘act of god’ that became the Coronavirus pandemic.
The other reason for asking if you can have 2 Trust Deeds, is when you’re already in an existing Trust Deed.
In this case, you can enter more than one Trust Deed, but you must have been discharged from the first Trust Deed before you enter the second arrangement.
Your chances of success on the second Trust Deed depend on factors individual to yourself, including the history of repayment during the first Trust Deed, how much debt was written off at the end, and your current level of debt.
If a Trust Deed does break down for whatever reason, it’s important for you and your debt expert to understand all the reasons why your Trust Deed failed.
If for example, you are unable to afford the contributions set out originally or felt pressurised to enter a Trust Deed rather than Sequestration or DAS, due to a lack of awareness of other options, or due to the perceived stigma attached to bankruptcy.
Debt management solutions, whether formal or not, should ultimately have the exact same objective; to help you manage your debts to the best of your ability and to help you move on with your life.
If you are in the position of needing advice on a second Trust Deed, call us on 0141 221 0999.
When to Seek Trust Deed Advice?
If you really want to know if a Trust Deed is a good idea, seek qualified expert debt advice today. If you do something about your debt today, you don’t need to worry about it tomorrow.
Reputable debt advice companies and debt charities are regulated by the FCA, this should help ensure that you are not ‘sold’ into a Trust Deed and that you are fully aware of the pros, cons and alternatives.
Remember, a Trust Deed may not be for you, but that doesn’t mean that you are beyond help. The sooner that you seek help, the sooner you can begin to understand what options are open to you.