A debt management plan could help you pay off your unwanted debts conveniently. However, many people are unaware of the basic requirements of a trust deed.
I have compiled this complete guide with FAQs and everything you need to know about applying for a trust deed.
What is the minimum amount of debt required to enter a trust deed?
There is no definite criteria for entering trust deeds.
However, you could be expected to have a minimum debt amount of £5,000. Otherwise, your trustee might ask you to look into alternate debt solutions such as a Debt Arrangement scheme (DAS)
How much debt do I need on average to enter a trust deed?
You are expected to have debts estimating between £7,000 to £8,000.
How will I know if trust deeds are the best option for me?
Trust deeds work best for people who have unwanted debts and are unable to pay them off.
In case you are able to make monthly payments for at least four years, trust deeds could be the best solution for you.
Moreover, if you have assets that can be sold to raise money for your creditors, a trust deed might be beneficial for you.
What amount of income do I need for a trust deed?
You are expected to have enough income to make monthly payments, after deducting your disposable income. This is the amount excluding your living expenses.
In case you have assets including a car or a home, you would be expected to have a higher level of disposable income to make your monthly payments.
Moreover, it is important to understand that if you are able to make your monthly payment within four years, you might not be able to convert your trust deeds to a protected trust deed.
Who do I contact if I want to apply for a protected trust deed?
Before you start with a trust deed, you will need to contact a licensed insolvency practitioner IP.
They will become your trustee and help you with your insolvency procedure. It is important that your credit rating is not significantly low. Otherwise, your creditors might not agree to get into an agreement with you.
What is the cost of a trust deed?
Your trustee might charge you a fee for setting up and processing your agreements. This is a single fix charge.
However, insolvency practitioners could be expensive for a protected trust deed. You might want to consider asking various practitioners before choosing a final one.
What type of debts can I include in my trust deed?
Any type of unsecured debt could be included in a trust deed. However, secured debts can not become a part of your trust deed under any circumstances.
- Credit cards
- Bank Overdrafts
- Guarantor Loans
- Everyday Loans
- Council tax Arrears
- Credit Union Loans
- Bounce Back Loans
- Personal loans
- HMRC debts
- Rent arrears
- Outstanding car parking charges
- Student loans
- Court fines
- Logbook loans
- Hire purchase agreement
- Debt accrued through fraud
What happens to joint debts in a trust deed?
If you share a debt with someone, your partner could be pursued for the whole debt. This is if the first person takes out a trust deed.
However, if the relationship breaks, either one of the partners could be asked to continue with the payments.
I would advise you speak to your trustee and go over the terms of the joint debt trust deed.
What happens if I cancel my trust deed?
Since a trust deed is a legally binding agreement, you might not be able to cancel it at your own will.
However, if you are unable to pay your creditors, your trust deed could fail. This could cause your creditor to force you into a sequestration.
What will happen at the end of my trust deed?
After an estimated period of four years, your debts will be paid off. Moreover, any left over amount will be written off.
Furthermore, you could be able to keep your assets. Your creditors can no longer contact you or force you into making payments.
Can I include my Payment Protection Insurance in my trust deed?
Yes, it is important to understand that any type of income you receive must be included in your trust deed.
You could be advised not to enter a trust deed in case you are applying for a PPI and are expecting to receive a greater amount of income compared to your debt.
However, your trustee could advise alternate debt solutions to you.
Am I expected to disclose my entire income?
Yes, it is crucial that you are honest about your income.
This is important because your trustee will provide an adequate debt solution on the basis of your income.
If your creditors find out about your expenditures and assets later, legal action could be taken against you.Moreover, your chances of getting any type of debt relief could be eliminated.
Your creditors could be forced into selling your assets to pay off their amount early.
Furthermore, you could even be forced into a sequestration. This means your name will be entered in the register of insolvencies. Hence, your credit rating might be affected significantly.
Can I enter a trust deed in case of a wage arrestment?
Yes, you could be able to enter a trust deed in this case. This is mainly because most of the wage arrestments are lifted once you enter a trust deed.
Frequently Asked Questions (FAQs)
Can I take out credit whilst in a trust deed?
You are advised not to take out credit whilst in a trust deed. However, you might be able receive an amount below £500.
Is it possible to reduce my monthly payment?
If you are unable to make payments towards your unsecured debts, your trustee could go over the terms of your trust.
After reevaluating your case, your trustee will speak to your creditors. If they agree, your trustee will process your new agreement.
Moreover, if you are lucky, you could even get debt relief for some time.
Can I switch my trust deed agreement?
You could be able to switch your trust deed based on your debt level. This means your trust deed may become protected.
However, if you have entered bankruptcy, you might not be able to switch your trust deed. An accountant in bankruptcy could help you with advice in this case.
If you decide to apply for a trust deed, your trustee could ask you to open a new account. I would suggest you try to keep an open mind while applying for a trust deed.
In case your debts are over £5,000 a trust deed could be the best option for you. If your debt amounts are below this amount then your trustee could advise you to seek alternate solutions.
Feel free to contact us for further debt advice.