Trust Deed

Only available in Scotland, a Trust Deed is a legally binding debt relief solution available to people living in Scotland with £5000 or more of unsecured debt.

A protected Trust Deed is a legally binding agreement for people struggling with debts of £5,000 or more. It is between an individual and a licensed Insolvency Practitioner (IP) who will manage the agreement with the creditors.

Entering into a Trust Deed, creditors will no longer contact you for payment. Interest relating to your debts are also frozen, and you will only pay back what you owe depending on how much you can afford. A Trust Deed is an alternative to a Debt Arrangement Scheme and Sequestration in Scotland.

Is a Trust Deed a good idea?

Trust Deeds provide the means for many people to manage their debts in Scotland. Without this type of debt solutions, a lot of people would be faced with fluctuating repayments and added strain on their finances.

How does a Trust Deed work?

The process typically entails a review of your finances with an Insolvency Practitioner, who will go through the details before presenting an estimated monthly payment. You would then agree to that figure and allow the Insolvency Practitioner to act on your behalf. They will make a proposal to your creditors, who will have to accept or reject it within five weeks of correspondence. Once a majority of creditors agrees to the proposal, the deed is registered and enacted.

If there is no response in the given time, it is assumed the deed can go ahead.  When the deed starts, you are protected.

Are Trust Deeds only available in Scotland?

Yes. Elsewhere in the UK, an appropriate equivalent would be taking an Individual Voluntary Agreement. To qualify for a Trust Deed in Scotland, an individual would have to have lived in the country for at least six months, while also having over £5,000 in debt which needs to be repaid.

Advantages of Trust Deed

Trust Deeds are a viable solution for the following reasons:

  • No more contact or enforcement by creditors: Once you enter into a Trust Deed, your creditors can no longer contact you and must deal directly with your IP regarding all matters of the arrangement
  • Trust Deeds typically come to an end after four years with all remaining debts at that time written off
  • You are still able to obtain credit, such as a mortgage or credit card, in a Trust Deed, but it could be more difficult than in normal circumstances
  • A Protected Trust Deed doesn’t prevent you from certain employment or public office like Sequestration
  • You make one affordable monthly payment, calculated after an allowance has been made for all the general living expenses and household bills
  • There are no fees associated with setting up a Trust Deed unlike other debt relief solutions

Disadvantages of a Trust Deed

There are some limitations in place for having a Trust Deed, namely :

  • Creditors may not agree on receiving their payments through this arrangement.
  • Your credit rating will be affected.
  • Student loans aren’t taken into account in a Trust Deed.
  • Your current employment or future employment may be affected

Understanding what can and can’t be paid with a Trust Deed

Trust Deeds are used to pay off anything considered an unsecured debt, which includes things like personal loans and some forms of credit. A trust deed cannot be used against hire purchase agreements or your mortgage.

Do Trust Deeds have spending restrictions?

The amount repaid each month will depend on several factors, primarily based on disposable income. The upper limit of what can be paid each month will vary from person to person, with no fixed minimums in place.

Does a Trust Deed affect your credit rating?

Your credit rating is affected for six years from the date the deed starts. This is due to the need for records to be kept public in an insolvency register. Credit companies use the register as a check.

What alternatives are there to Trust Deeds?

Sequestration can be used if it is clear the individual is unable to pay off debts. You can learn more about Sequestration here.

Get advice on Trust Deeds

Want to learn more about Trust Deeds, or need help finding a suitable debt solution for your circumstances?

You can call the advisors at Hillcrest Finance every weekday from 8 am on 0141 478 0862. You can also get in touch via WhatsApp.

Get in touch with us about a Trust Deed today