When your Trust Deed comes to an end, your Trustee will issue what’s known as a ‘letter of discharge’.
A copy of the letter of discharge will be sent to Accountant in Bankruptcy (AiB), the regulatory body of Trust Deeds in Scotland and the Register of Insolvencies will record your Trust Deed discharge.
If you enter a Trust Deed, typically you’ll finish your repayment in 48 months, as long as you made all payments in your plan.
Over those four years, you’ll have made 48 affordable monthly payments – and this will count as ‘full and final settlement’ of the unaffordable debts included in your Trust Deed.
At the end of your Trust Deed term, any unsecured debt that you weren’t able to repay during your Trust Deed will be written off. You will now be free to enjoy life after debt.
When you are discharged from a Protected Trust Deed, you will be discharged from any outstanding debts from the creditors that you had included at the date you registered your Trust Deed.
This means that your lenders are no longer allowed to pursue money that was owed to them when you signed the Trust Deed.
However, some debts won’t be written off such a student loan, or any court fine.
What Happens With Secured Debts After A Trust Deed?
If you owe money that is secured against an asset such as property or a vehicle, it won’t be included in your Trust Deed. Your secured lenders won’t be consulted on whether they agree to your Trust Deed, and they won’t write off monies that you owe them, whether you complete your Trust Deed term or not.
However, the fact that you’re in a Trust Deed should make the secured payments easier to make, as your Trust Deed payments would be calculated not to take up any monies that you need for your typical essentials – not just your rent or mortgage, but utility bills, travel expenses and so on.
If you’re a homeowner, you might be required to release some equity from your property, so you can repay your unsecured lenders more of what you owe them before they write off the rest.
However, you may find that the impact of your Trust Deed on your credit rating makes it harder to release equity. Mortgage providers can see that you’ve entered a Trust Deed, so you might find that it’s harder to get a new mortgage deal, or that you’re charged a higher rate of interest if you do.
If you can’t release any equity then your Trust Deed could be extended by 12 months.
Trust Deed Credit Score And History Impact
Information about Protected Trust Deeds and defaults will remain on someone’s credit reports for up to six years after they occur, so they are likely to remain on someone’s credit history even after they have been discharged from their Protected Trust Deed, which normally lasts for 4 years.
If you’ve already defaulted on your credit agreements even before considering a Trust Deed, this too will be logged on your credit score.
How Will A Debt Arrangement Scheme Affect My Credit Rating?
When your DPP is approved, you’re placed on the DAS register. This is coordinated and managed by the DAS administrator and is available to credit rating agencies. This register, along with other insolvency registers, is added to other information to your credit report, which calculates your credit score.
Just like a Trust Deed, or even a simple default notice, a Debt Arrangement Scheme will affect your credit rating for at least six years. However, this may be extended further depending on how long it takes you to pay off your Debt Arrangement Scheme in total.
E.g. if you are on a DPP for under 6 years there is no difference, or if you are going to repay a DPP for longer than 6 years; your debts will not be marked as satisfied until the debt has been repaid at the end of the DPP.
What is a Default Notice?
A default notice is usually sent when you’ve missed or paid less than the full amount for three to six months.
The default notice will give you at least two weeks to catch up with any missed payments. If you can do this your account will carry on as normal. If you can’t pay the missed payments in this time your account will default.
Default notices only apply to debts which are regulated by the Consumer Credit Act, such as credit cards, payday loans, personal loans and store cards.
You’ll know a default notice has been served on you when you receive a letter informing you of a ‘Default notice served under section 87(1) Consumer Credit Act 1974’. The most recent revision of this act was in 1983, long before the evolution of the current Trust Deed legislation and the Debt Arrangement Scheme.
As the wording of the default notices is quite old, you may, therefore, be directed towards Trading Standards and/or a solicitor – remember this is somewhat outdated legislation and you are advised to instead contact a qualified debt advisor, or debt charity instead.
Unless you can get a default notice removed within 2 weeks, this will be recorded on your credit profile for six years. Depending on your lenders criteria, this may have the same affect as a Trust Deed or a Debt Arrangement Scheme registered against your name.
Can You Rebuild Your Credit After a Trust Deed?
Yes, it is possible to begin to rebuild your credit rating after your Trust Deed has finished.
Eventually getting a mortgage after a Protected Trust Deed is achievable. It may not always happen immediately and will require a bit of work – it is certainly possible for most people to successfully be approved for a mortgage after a Trust Deed.
Also, it will not be possible to obtain a re-mortgage on a home that is still in the Trust Deed, without the Trustee’s permission, until they have discharged their interest. A Trustee’s interest in a property can continue even after the debtor is discharged.
It may be that the lending terms are not as favourable as before, however by showing a commitment by making regular payments to utility bills, and by using credit sensibly, purely for the purpose of rebuilding your credit score, you will in time secure a more favourable lending rate.
Paying utility bills by direct debit can help rebuild credit after a Trust Deed and even just joining the electoral roll helps prospective lenders build trust in you.
Life After Debt?
Many people in Scotland have approached Trust Deed Scotland® after they’ve put off seeking help over their unaffordable debts for a number of years.
So severe are some people’s financial difficulties, that if minimum payments were made only; it may take them longer than two decades to clear their outstanding debts.
If you’re struggling with debts and making minimum payments to debts such as credit cards, you may regard protecting your credit score as being more important to you than dealing with the debts you have. This isn’t uncommon.
However, anyone pondering the pros and cons of the impact of entering a formal debt management solution may have on their credit score after a Trust Deed finishes should look towards the long term outlook and whether it’s better to essentially press the restart button, or continue on alone waiting for a solution to present itself in another form.
Want Free Trust Deed Advice?
If you feel you’re struggling with debt, seek qualified expert debt advice today. If you do something about your debt today, you don’t need to worry about it tomorrow.
As well as Trust Deeds and Debt Arrangement Scheme, there are other alternative debt solutions in Scotland.
Trust Deed Scotland® are able to offer no-obligation, confidential advice on debt management methods in Scotland. Call us on 0141 221 0999 or try our Trust Deed Wizard® tool to get started today.