How Long Does a Trust Deed Last?
A Trust Deed usually lasts for a three year period. This is in line with the current period of a sequestration (The Scottish term for Bankruptcy). 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. Sometimes 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.
How much does a Trust Deed cost?
It is normal to be charged an upfront Instruction or Drafting fee by the debt management company or Insolvency Practitioner who helps you put your Trust Deed on place. This will normally be based on your disposable income. There are additional costs associated with a Trust Deed which 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.
Will I lose my house?
One of the advantages of the Trust Deed is that you do not lose your house. 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.
What will happen to my Car?
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 retain 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 if I have Any Other Assets?
How the Trustee deals with any other assets owned by a person signing a Trust Deed will depend on the value of the assets, their nature and whether they are required for any particular purpose. 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.
If I enter a Trust Deed, what happens to my credit rating?
Your credit rating will be damaged for a total of six years, including the 3 years of your Trust Deed. It will not be damaged as badly as bankruptcy.
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.
Will I still be able to borrow money?
During your Trust Deed you are usually not allowed to borrow money. You would not normally need to, as your financial situation would be much easier than it is now. However, it is advisable to put aside a little money each month so that you have a 'rainy day fund' to turn to instead of credit cards and other debt.
What if I can't afford the Trust Deed payment?
If you find that you can't afford the Trust Deed payment 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.
What if I have an emergency, or lose my job?
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.
Will the 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?
The Trust Deed is far more private and discreet than bankruptcy, and involves little or no stigma. There is no publicity involved, your tax code remains the same, and it is very unlikely anyone should find out. However it is possible for members of the public to search for you on the Insolvency Register to find out if you are in a Trust Deed. This register is available to search on the internet.
Can I still 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.
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.