Are Trust Deeds a Government Approved Debt Solution?
You should not specifically consider a Trust Deed to be a Government Approved Debt Solution (as it is described on various other websites). Scottish Trust Deeds do however exist under Government insolvency legislation and are an available formal legal solution to deal with unmanageable personal debt.
Will a Trust Deed affect my credit rating?
A Trust Deed will normally have a significant negative effect on your credit rating. Details of the Trust Deed will remain on your credit rating for six years during which time you will find it more difficult to borrow. For more information see: http://www.beatmydebt.com/scottishtrustdeeds/how-will-a-trust-deed-affect-my-credit-rating.htm
Will my partner be affected?
Your partner's credit rating should not be affected, but if you live at the same address this can happen by mistake.
Will I still be able to borrow money?
During your Trust Deed you are usually not allowed to borrow money and you will generally not be able to do so as your credit rating will be negatively affected. You would not normally need to, as your financial situation would be much easier than it is now. However, it is advisable to try to save a little money each month from your allowable living expenses so that you have a 'rainy day fund' to turn to instead of credit cards and other debt.
How much debt must I have to do a Trust Deed?
There is no legal minimum amount of debt to qualify for a Trust Deed. However, in reality Trust Deed companies vary in the minimum amount of debt they will accept to take on a case. For more information please speak to a Beat My Debt advisor.
What if I can't afford the Trust Deed payment?
If you find that you can't afford the Trust Deed payment perhaps because your circumstances have changed you should contact your Insolvency Practitioner and explain the situation. They may be able to lower the payment for you, or find another way to resolve the problem.
In cases of financial emergency you may qualify for a payment holiday. Then you can pick up where you left off a few months later. If you lose your job permanently and you cannot afford to continue the Trust Deed, further negotiations can be carried out with the creditors - they may accept what you have paid so far and conclude the Trust Deed.
How much does a Trust Deed cost?
You should not have to pay to put your Trust Deed on place. If you are speaking to a company who wants to charge you a set up or instruction fee, there is no need to pay this and you can talk to an alternative firm if you wish.
There are additional costs associated with a Trust Deed called Nominee and Supervisor fees. These are paid to the Insolvency Practitioner during the life of the Trust Deed. However, you do not have to pay these yourself. They are taken out of the agreed payments that you make into the Trust Deed.
How long does it take to set up a Trust Deed?
In normal circumstances it might take around six weeks to set up a Trust Deed. This period of time will vary according to individual circumstances.
Will I have to go to court to set up a Trust Deed?
You will not have to go to court. However, you will need to have a face-to-face meeting with your Insolvency Practitioner or their representative. This will usually be held in your home.
If I start a Trust Deed can I have a bank account?
If you undertake a Trust Deed, you will be able to have a bank account and manage it yourself.
If you owe money to your bank, perhaps in the form of a credit card, personal loan or overdraft, you will almost certainly need to open a new account with a different bank. The reason for this is that to resolve a debt problem, you need to be able to ensure that you are in full control of your money and keep your income separate from all your creditors.
If you need to open a new account, you should ask for a basic account only with no overdraft facility. You should be able to do this even if you have a poor credit rating. There are many banks which offer this facility.
Will I lose my house if I do a Trust Deed?
Provided you meet your commitments to the Trust Deed you will not lose your home. A Trust Deed is often selected by homeowners in preference to bankruptcy which can often lead to the loss of a home.
However, if you are a home owner, you will have to agree to realise 100% of your share in any equity available at the time that the Trust Deed is protected and put in place. This can be done by remortgaging, payment being made from a third party (often a family member) or additional payments being made at the end of the Trust Deed term.
We strongly recommend that any homeowner gets written clarification as to how any equity in their home will be dealt with prior to signing a Trust Deed.
What will happen to my Car if I do a Trust Deed?
If your car is of a reasonable value and required for your everyday life (for example needed to travel to and from work), you will normally be allowed to keep it.
If the car is subject to Hire Purchase, then you will be allowed to continue to make payments to the hire purchase company which will be included as a budget item within your agreed monthly expenses.
If you have a particularly valuable car, the Insolvency Practitioner may ask you to sell it and buy a more reasonably priced vehicle. Any proceeds from this sale will go to your creditors.
What will happen to my possessions if I do a Trust Deed?
As a rule of thumb, you will be able to keep any reasonable household goods such as furniture, kitchen equipment, washing machines, TVs and stereo systems. However, assets which are not classed as reasonable household items such as expensive art or antiques will normally have to be sold for the benefit of your creditors.
What alternatives are there to Trust Deeds?
There are alternative debt solutions if you live in Scotland. These include:
Debt Arrangement Schemes
Debt Management Plans
Sequestration (bankruptcy),
The solution you choose will depends on your circumstances. Please speak to a Beat My Debt advisor to get more information about these different solutions.
Will my partner be affected?
Your partner's credit rating should not be affected, but if you live at the same address this can happen by mistake.
Will someone come round and take my possessions?
No. The Trust Deed gives you legal protection from all creditor action. Bear in mind that if you have any unusually expensive possessions, these may need to be sold and put towards the Trust Deed.
Will I have to go to court or have a face-to-face meeting?
You will not have to go to court. However, you will need to have a face-to-face meeting with your Insolvency Practitioner or their representative. This usually takes the form of a home visit.
How much will my monthly payments be?
This depends on your individual income and expenditure circumstances and will be based on your disposable income.
What does Protected Trust Deed mean?
Although the solution is commonly referred to as a Trust Deed, once your creditors have agreed to the arrangement, it is formally known as a Protected Trust Deed.
Once your Trust Deed firm has written to your creditors with details of your proposed Trust Deed, your creditors have the opportunity to support or reject the proposal. Provided few creditors raise objections your Trust Deed will become “protected” which means that all creditors are bound to its terms (whether they accepted or rejected it) and that none can take any kind of recovery action against you.
Will I be completely debt free after my Trust Deed?
Provided that you have included all unsecured creditors in your Trust Deed (which you must), have not taken on further debt, and have met your commitments to the Trust Deed you will be completely debt free of unsecured debt at the end of thearrangement.
Please note that Trust Deeds do not include secured debts such as mortgages or hire purchase agreements.
Do I have to own a house to do a Trust Deed?
No. Trust Deeds are available to homeowners, tenants and those who live with friends or family.
What debts can be included in a Trust Deed?
You must include all unsecured debts. Typically these might be credit cards, overdrafts, bank loans, catalogue debts, payday loans etc. However, you cannot include student loans in a Trust Deed.
You cannot not include secured debts such as mortgages, secured home loans or hire purchase usless you are happy to allow these to be repossessed. Generally speaking you will continue to pay secured debts in full. Provision for this will be included in your monthly expenditure budget.
Can I change my Trust Deed Trustee if I am unhappy?
Generally speaking you cannot change your Trustee once you start your Trust Deed.
Once your Trust Deed is in place, if you are unhappy you should firstly raise your concerns with the Trustee themselves. If you are still unhappy with the response you can then raise the matter with the Trustee’s professional body. Should you remain unhappy you can take the matter to the Accountant in Bankruptcy.
What if my Trust Deed is rejected?
Although there cannot be a 100% guarantee, it is unlikely that your Trust Deed will be rejected. Your insolvency practitioner will advise you as to the likelihood of acceptance and will not normally proceed with the application if they are not confident of success.
However, in the unlikely event that your trust deed is rejected, you are returned to the position that you are in now. You are not forcibly made bankrupt. You may then choose to consider a debt management plan or propose the Trust Deed again.
What if I've committed fraud or gambled?
Your Trust Deed may be more likely to be rejected by creditors. But it may still be accepted. It is very important to stop such activity as soon as possible.
How long does a Trust Deed last?
A monthly payment Trust Deed usually lasts for a three year period. However, in certain circumstances, this period can be shortened if you pay the Trust Deed off with a lump sum, either by remortgaging or borrowing money from friends or family. The period may also be extended to offset equity in your house which should otherwise be released.
If available it is possible to undertake a Trust Deed with a lump sum alone, without any monthly payments thus completing the Trust Deed almost as soon as it starts.
Will a Trust Deed affect my job?
Usually not. The Trust Deed is private and discreet so your employer would not normally find out about it. If you are self employed, you will be able to continue to trade. You are also allowed to continue be a Director of a Limited Company.
Will anybody find out about my Trust Deed?
A Trust Deed is a private and discreet procedure, and involves little or no stigma. There is no publicity involved, and it is very unlikely anyone should find out. However it is possible for members of the public to search for you on the Scottish Insolvency Register to find out if you are in a Trust Deed. This register is available to search on the internet.