A Trust Deed is a legally binding voluntary agreement which allows your Trustee to take over responsibility for dealing with your creditors. This personal debt solution is only available for Scottish residents.
Any payments you have been making to your creditors stop and, instead, you pay your Trustee whatever surplus income you have left over a fixed term – usually 48 months.
Terms of the agreement state that creditors can no longer call or chase you for payment. Instead, they must deal with the Trustee and you are protected from further legal action.
Who can sign it?
Anyone who is having difficulty paying their debts, and who has an income, or owns assets.
How does a Trust Deed work?
After the Trust Deed is signed, the Trustee will write to all your creditors. Unless creditors who are owed more than one third of the total debt, object (which is very rare) the Trust Deed can be protected, which will prevent them from taking any further action against you.
Any correspondence from your creditors should be passed to your Trustee to deal with. You will need to continue to pay your mortgage and any other ongoing living expenses.
You can continue to work in order to earn a living for you and your family. If your earnings are sufficient, you may have to pay a proportion of your income to your Trustee.
Until the Trust Deed is finished, you need to let your Trustee know if you move house, or your financial circumstances change.
Benefits of a Trust Deed:
- You no longer have to deal with your creditors – your Trustee does that for you
- If you are in financial difficulty, you can sign a Trust Deed immediately
- You only need to make one payment a month from your surplus income
- Once the Trust Deed has become protected (and the overwhelming majority do, usually a few weeks after you sign it) your creditors cannot arrest your earnings, or take any further action against you
- There is no need for your employers to know that you have signed a Trust Deed, unless they are creditors of yours
- A Trust Deed will normally only last three years and after that, your debts are effectively written off
- Your credit rating is not automatically affected by signing a Trust Deed
- There are no court proceedings involved.
Frequently Asked Questions
Q: Will my home have to be sold?
A: It is extremely unlikely that your home will be sold, unless you agree to this happening. Even if your house is worth more than your outstanding mortgage, it is usually possible to agree some other way of releasing this balance without having to sell it.
Q: What about my furniture and car?
A: You are allowed to retain all basic household items. You can keep your car if you need it for work.
Q: How much does it cost?
A: There is no initial cost. If you sign a Trust Deed, your Trustee’s fees and expenses will be paid from contributions from your income and payments for your assets. If you have insufficient income or assets it is unlikely that a Trust Deed will be possible.
Q: Can I have a bank account?
A: Yes, although the bank may insist that it does not become overdrawn.
Q: How long will it last?
A: Usually four years.
Q: Is there anything else I can or cannot do?
A: You can act as a director of a limited company if the company’s articles of association are changed.
Where can I go for help?
If you feel a Trust Deed may be appropriate for you, contact us and your nearest Begbies Traynor Trust Deed Adviser can arrange a free initial consultation with you. Other alternatives that may be available are sequestration and debt arrangement schemes.
Our specialist personal insolvency team deal with financial management assignments of all kinds and are able to offer a personal and sympathetic approach to people’s financial problems. We also have a dedicated scottish personal insolvency website that offers solutions such as trust deeds to people in debt.
We hope that you will be satisfied with the service that we provide, but we recognise that there may be occasions where you will not be satisfied with the way in which the matter has been dealt with. In those circumstances please refer to our Complaints Procedure.