A trust deed is a voluntary and legally-binding agreement between you and your creditors that can help you get out of debt.
You can use a trust deed to pay off part of any unsecured debt such as credit cards, payday loans, store cards and money owed to HMRC.
A trust deed can only be arranged and administered by a licensed insolvency practitioner such as Trust Deed Scotland.
A trust deed is available to people who’ve been living in Scotland for more than six months and who have debt of £5,000 or more. There are many factors that can influence your eligibility for a trust deed, including:
You can qualify as a homeowner, a private tenant, a council tenant, or someone who lives with their parents. If you own your home, your Trust Deed Scotland advisor will explain to you how you can protect it so you’re not forced to sell it to pay your debts.
Find out if you’re eligible for a trust deed with our Trust Deed Debt Calculator.
If you live in Scotland, other options for paying debt include sequestration (the Scottish version of bankruptcy), but this is usually advised against if you have assets such as a house.
Another option is a debt arrangement scheme, a government-endorsed initiative that lets you pay off your debt over an extended period of time. Your debts get frozen and you make payments at a rate you can afford – however, this involves paying back the full debt amount owed.
A third option is a trust deed, where affordable monthly payments are agreed typically over four years, after which any remaining debt is generally written off.
If you live in England, Wales or Northern Ireland, you can use an individual voluntary arrangement, which is similar to a trust deed agreement.
Learn more about the different options available for paying debt on our debt solutions page.
You can also contact us by calling 0141 221 0999 or emailing email@example.com, or visit our office at 2 West Regent St, Glasgow G2 1RW. One of our advisors will walk you through the options and advise on what will be best for you.
Arrange a free meeting with one of our advisors, who will learn more about your situation and guide you through the different financial options available.
Your advisor will then give you a checklist of any additional information required. Once we’ve received it, we can start drafting a proposal for your trust deed. Your advisor will arrange a meeting with you to finalise the paperwork, return any original documents you gave to us and answer any final questions.
They will also help you setup your first trust deed payment, after which you can stop all separate debt payments to your creditors. These new monthly payments will be based on what you can afford, and will be taken out every month at a convenient time for you. You can make the first payment as soon as you’re ready.
In the meantime, creditors have five weeks to make a claim on your trust deed application. If they don’t, your trust deed will become protected. If they do, your trustee will let you know and advise you on your options.
After you’ve agreed and signed your trust deed, the next step is to get it approved by your creditors to protect it. Trust Deed Scotland currently has a 98% creditor acceptance rate.
Getting your trust deed approved gives you legal protection from your creditors – as long as you stick to the terms of the trust deed, creditors can’t take further action to pursue the debt.
A protected trust deed also protects you from bankruptcy, although your trustee or creditors can still petition for it if you break the terms of the trust deed.
If creditors don’t agree to your trust deed, it’s not ‘protected’ and therefore not legally binding.
To ensure your expectations are managed from the start, your Trust Deed Scotland advisor will initially let you know what your chances are for approval based on your circumstances. Two-thirds of your creditors must agree to your trust deed proposal for it to be approved and protected.
We’ll process your paperwork and register your case on AIB (Accountant in Bankruptcy), where your creditors can access it. They usually have five weeks to accept or reject it – the decision will be relayed to you by the insolvency practitioner (your ‘trustee’), as creditors can’t directly contact anyone who has entered a trust deed.
This five-week period is known as the ‘protection period’. After it lapses, with no claim from your creditors, you’ll receive your protection letter from your trustee, making you aware that your trust deed has been approved and that you’re now in a protected trust deed agreement.
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The most important rule is that you stick to the monthly debt-payment schedule agreed with your creditors – if you do this, your creditors can’t take further action against you.
During your trust deed term, you can’t take out any new credit, such as a loan or credit card.
If you’re a homeowner and the home is worth more than the mortgage, you may need to withdraw some of its equity and use it to pay some of your debts, but this will be agreed before entering a trust deed on your terms.
£5,000. You also need to have a regular income or for someone to guarantee to pay some or all your debt.
Trust deeds and sequestration are different ways of dealing with debt that you can’t pay over a set period.
They both agree a schedule to pay debt to your creditors, with sequestration generally taking one year as opposed to four when it comes to trust deeds. However, unlike sequestration, trust deeds don’t carry the chance of you losing your home or other assets.
A secured debt is usually for a large loan of more than £10,000, such as a bank loan or a mortgage. The company lending you the money will use your asset, often your home, as security if you can’t repay your loan. That means your lender has the right to repossess your home and sell it to pay your debt.
An unsecured loan is when you borrow money from a bank or another lender and agree to make regular payments until it’s paid. Because the loan isn’t secured on your home, the interest rates tend to be higher.
Student loans can’t be included in a trust deed but all other unsecured debts can be considered.
All fees are included in your monthly payments:
These are charged against the money you owe creditors, so will be agreed between you and your creditors at the start.
It’s based on your disposable income, which is calculated by deducting your living costs (mortgage/rent, bills, child car, transport costs, food, etc.) from your income.
Most people find after entering a trust deed that their monthly debt payment is hundreds of pounds less than when they were making separate payments to their creditors.
No. However, you can still enter a trust deed if you’re self-employed and can prove your income, or are employed part-time.
Typically four years – you make 48 monthly payments (the same amount each month) to your trustee who distributes the money to your creditors, minus their fee for arranging and managing the trust deed.
However, in circumstances where you’ve agreed with your trustee to pay some equity from your home, it can take more than four years.
The rest of your debt will usually be written off, leaving you debt free, unless you’ve agreed otherwise with your trustee beforehand.
Much will depend on your income and whether you can convince a mortgage lender that you’re a responsible borrower. We recommend that you talk to a financial advisor for more information about this.
Your credit rating will probably be affected, but remember it will already have been damaged if you’ve missed any payments to your creditors. Once your trust deed agreement has ended, you can start rebuilding your credit rating.
The trust deed will be on your credit record for six years after you start it. The average trust deed lasts four years, so it’ll still be on your credit record two years after you’ve finished it.
Your assets should be safe if you stick to the trust deed’s terms. However, if you’re a homeowner and your home is worth more than the amount owed on your mortgage loan, you may have to release some of its value.
The gap between the value of your home and mortgage is called equity. Your advisor will discuss this with you, and if necessary, any equity arrangements will be organised before entering a trust deed.
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Or for more information, call 0141 221 0999, email firstname.lastname@example.org, or visit our office at 2 West Regent St, Glasgow G2 1RW.