A trust deed is a legal arrangement available to people resident in Scotland only. It can offer you legal protection against lenders of unsecured loans, although they’re not obligated to accept the arrangement.
Your trust deed will involve just one affordable monthly payment, although they’re less flexible than debt management plans and if it falls through you risk bankruptcy. Once your trust deed is in place, you can’t change the amounts as you sometimes can with DMPs. If it does work out, though, then it’s a great solution, so visit this website for more information.
You can have any unaffordable unsecured debts written off
Once the agreement has ended successfully, any outstanding debt included in it will be written off. Any outstanding debts that weren’t included in the trust deed will still be payable, though, alongside any secured debts.
Your payments will be affordable
Trust deeds treat your bills and your other important living costs as priorities so you’ll only pay down your debts from money left over once your essentials are covered. Your lenders will want you to pay as much as you can safely and realistically afford, though, so you may have to reduce your non-essential spending. It’s only fair.
Your lenders can’t take any more action against you
A trust deed is a legal agreement, so your lenders can’t take any more action against you once at least half of them have accepted the terms and as long as they are owed at least a third of the total debt. None of your lenders have to agree to the terms, but many do because it means they’ll get at least some of the money owed to them with no further expensive effort. You must keep up with the payments, though.
How trust deeds work
Trust deeds help borrowers with unaffordable debts of more than £5,000. The deed reduces the amount you pay towards your debt each month so that it’s affordable. Your trust deed will last for a set period – often four years – after which any debts listed in it that are still unpaid are written off.
Depending on the size of your debt, you may need to release equity from your home to reduce the amount.
If you can’t release equity for some reason, then you may need to make extra payments up to the value of the equity that you can’t release.
Is a trust deed right for me?
If you’re trapped in debt and you think you’ll never repay it, then a trust deed could be a good way out. With a trust deed, you don’t need to go as far as bankruptcy to deal with unaffordable debt.
You have to show that you really can’t afford to repay what you owe otherwise and you must make your monthly payments until the end of the term. It’s also important to note that your details will be visible on the Register of Insolvencies.
There is a downside
While trust deeds are great when you’re struggling, having one will affect your credit rating for up to six years after it starts. This might make it difficult to get a mortgage or other credit, or you may have high interest rates applied to any loans you get.