Trust Deed or Debt Arrangement Scheme – Complete Review
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
Are you worried about managing your debt? Do you want to learn more about trust deeds and debt arrangement schemes?
You’re at the right place. Every month, more than 170,000 people visit our website seeking advice on money problems.
This simple guide will help you understand:
- What a trust deed is
- How a debt arrangement scheme works
- The difference between a trust deed and a debt arrangement scheme
- When to choose a trust deed
- When a debt arrangement scheme might be a better choice
We know that being in debt can be scary and confusing. And we understand your concern about the long-term effects of a trust deed.
Our team has lots of experience helping people with money issues; we can walk you through the ins and outs of trust deeds and debt arrangement schemes.
What is the difference between a Trust Deed and a Debt Arrangement Scheme?
A Trust Deed is for people who have unpaid debt over the amount of £5,000.
On the other hand, a DAS is for people who have a debt of £5,000 or less.
A Debt Arrangement Scheme (DAS) allows you to pay your debt over a long period of time. The length of time can be from 4/5 years to 12 years or so, depending on the provided debt solution.
Trust deeds typically last 4 years.
Having the right information about these options can help you make a solid decision about which debt solution would be most suitable for your financial situation and can prevent you from mistakenly entering the wrong solution, as this forum user has found:
When Should I Opt for a Trust Deed?
- You wish to remove debt within a specific time period:
If you have unsecured debts that total up to more than £5000 and you wish to clear those debts within 4 years, then it may be beneficial to look at trust deeds for help.
A trust deed typically only lasts 48 months (4 years). After this, all remaining debt(s) that you had towards your creditors will be written off.
- You need help from advisors:
The great thing about trust deeds is that you will have an advisor who will help you come up with a payment plan so you can afford your monthly payments towards your creditors. This will undoubtedly reduce the pressure and stress of working out your own payment plan.
When it comes to your valuable assets, they are passed onto a third party known as the trustee. It’s the job of the trustee to repay your creditors as much of your debt as possible. This may include some of your belongings being sold off so that money can be raised in order to pay your creditors.
- It offers a legally binding agreement:
Another great thing about trust deeds is the fact that it’s a legally binding agreement. This means that once a trust deed has been accepted and put in place, your creditors cannot pursue legal action against you (for example, trying to make you bankrupt).
Furthermore, once a trust deed has been put in place, your creditors also cannot add interest or charges on your debt(s).
When may a trust deed not be right?
That being said, a trust deed does have some shortcomings. For example, its eligibility criteria dictate that you can only qualify for a trust deed if you have unsecured debts that total up to more than £5,000.
Hence, if your debts total up to less than that, then a trust deed would not be feasible for you.
How a debt solution could help
Some debt solutions can:
- Stop nasty calls from creditors
- Freeze interest and charges
- Reduce your monthly payments
A few debt solutions can even result in writing off some of your debt.
Here’s an example:
Situation
Monthly income | £2,504 |
Monthly expenses | £2,345 |
Total debt | £32,049 |
Monthly debt repayments
Before | £587 |
After | £158 |
£429 reduction in monthly payments
If you want to learn what debt solutions are available to you, click the button below to get started.
When Should I Opt for a Debt Arrangement Scheme (DAS)?
- You own a home:
A DAS is something that is often preferred by homeowners who have a large amount of equity in their home, as it protects them from bankruptcy.
That being said, it’s important for you to note that mortgage payments still need to be made.
- You work in the financial sector:
A debt arrangement scheme would also be suitable for you if you don’t want to have to sell your home or if your employment might be affected by other options such as a protected trust deed or sequestration.
For example, if you have a job in the financial sector, then going bankrupt would cause you to be dismissed. Similarly, becoming bankrupt or opting for a trust deed can prevent you from acting as a company director.
- You are able to make regular monthly payments:
A DAS will include you making monthly payments towards your creditors as part of a Debt Payment Programme (DPP). It can be a great option for you if you have enough money to make regular payments that would result in your debt being paid off in a reasonable time.
This debt payment programme is produced after you have calculated your essential expenditures and determined the amount you can afford to contribute towards your DAS each month.
- You have debt totalling £5,000 or less:
You can also choose to opt for a DAS if you have debt that totals up to less than £5,000. This is because a DAS could allow your debt to be repaid much more quickly than a trust deed would.
It’s important to note that a DAS involves you paying the entirety of your debts that you have towards your creditors over the course of a certain period of time. On the other hand, a trust deed involves some portion of your debt being written off.