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Trust Deed advice – Complete Breakdown, Tips & More

Trust Deed Advice

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

A trust deed is a legally binding agreement that could help you deal with your debts. However, it could be difficult to understand the legal terms of a trust deed. 

I have compiled this complete guide to help you understand how a trust deed works.

How does a trust deed in Scotland work?

Trust deeds in Scotland are more common than you think. 

You begin with speaking to a licensed insolvency  practitioner. After a thorough evaluation, a voluntary agreement is made between you and your trustee. 

Creditors expect regular monthly payments from you for an estimated period of 4 years. After which, you are debt free and your remaining debt is written off. 

Who looks over my assets in a trust deed?

The ownership of your assets and belongings are transferred in the name of your trustee. 

Your trustee will pay your creditor on fixed monthly intervals. This way your creditors can not contact you directly. 

Will my trust deed affect my job?

No. A trust deed will not affect your job as long as it doesn’t interfere with your ability to do your job. For example, if your job involved managing money or is in the finance industry it may be affected.

How do I choose a guarantor for a trust deed?

A guarantor in a trust deed could help you pay off your debts quickly. Moreover, you protect your assets from being sold to pay your creditors.

In case your financial situation worsens, your guarantor could continue to make monthly payments for you. 

I would advise you to pick someone close to you. This could be a close friend or a family member. 

Can I set up a trust deed agreement directly with my creditor?

You could be able to set up a voluntary agreement with your creditors. 

This is when you set informal payments with your creditors. You will be responsible for your finances. 

However, this could be risky. You might not have any security and your creditors could force you into making payments early. 

Do I need to sell my assets in a trust deed?

No, as long as you pay your debts on time, you do not need to sell your assets

However, if your financial situation worsens, you may have to sell your assets to pay off your creditors. 

Will my friends know about my trust deed?

It is possible for your friends and family to find out about your trust deed agreement. This is mainly because your information is added to a register of insolvencies. This is a register that is publicly available for everyone.

How do I calculate my monthly payments for a trust deed?

Once you enter into a trust your trustee will evaluate your income and expenditure. After thorough calculation, an amount will be derived after deducting your disposable income. 

This will be the amount you need to your creditors for an estimated period of 4 years. 

Who do I contact for debt advice?

Debt advice in Scotland could come from a free debt advice sector. Moreover, you could contact a debt charity or investigate the services of a qualified expert

Can my trust deed affect my credit rating?

Yes, your trust deed could affect your credit rating significantly. However, it is important to understand that you could be able to recover your credit score after you are done with your arrangement. 

trust deed advice

What type of debts can I include in my trust deed?

Any type of unsecured debt could be included in a trust deed

These include: 

  • Unsecured bank loans
  • Payday loans 
  • Credit cards
  • Council tax arrears
  • Store cards
  • Catalogues 
  • Overdrafts
  • Credit Unions
  • Previous Mortgage Shortfalls
  • Catalogues 
  • Overdrafts
  • Credit Unions
  • Previous car HP
  • HMRC Bills 

Can I get a mortgage after a trust deed?

You might be able to get a mortgage after you have received your letter of discharge. However, this could depend on your monthly income. 

Moreover, it could also depend on your ability to convince your lender that you will be able to keep up with the monthly payment.

I would advise you to speak to your financial advisor for more information.

Is a trust deed a good idea?

A trust deed could be the perfect solution for you if you are a Scottish resident and you have unsecured debt. 

Trust deeds usually last for 4 years. However, not everyone is able to make a commitment for that long. 

I would advise you to speak to your trustee. They could help you understand which debt solution could be the best for you. 

What will happen after I get discharged?

You receive your letter of discharge after you have paid off all your debt amount. This means you no longer owe any amount to your creditors. 

Can I apply for a loan while in a trust deed?

I would advise you not to apply for a loan in a trust deed.

It is highly unlikely that you will be successful to pay off your debt and loan at the same time. You could find yourself in a difficult position. 

Moreover, you might not be able to apply for guarantor loans or payday loans. 

Can I buy property while I am in a trust deed?

If you buy property while in a trust deed, you might have to turn the ownership of your home to your trustee. 

Moreover, you might not be able to get a mortgage.

How do I freeze my interest and charges? 

Once you enter a protected trust deed, your interest and charges will automatically be frozen. 

What are the types of unsecured debts that are not covered in a trust deed?

Student loans are not included in a trust deed

Moreover, a special consideration must be given in case of a guarantor loan. This is because your guarantor is liable for the full balance of the loan if you enter a debt repayment scheme.

To conclude

This guide includes tips and advice regarding a trust deed. Read the instructions carefully as it will help you give an insight on all the important information you need.

Feel free to contact us for more information. 

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