A trust deed could be the perfect solution for your unwanted debts. However, it is important you do a thorough analysis of the agreement before entering. This is because there are several cons of a trust deed.
I have compiled this complete guide, which will inform you about all the necessary things you should be aware of before applying for a trust deed.
Read the instructions carefully. It includes a complete guide, FAQ, tips and much more.
What are the drawbacks of a trust deed?
I will list down the most significant disadvantages of a trust deed for you.
- You will have to make monthly contributions for an estimated period of 4 years.
- Your credit rating could be significantly reduced.
- A trust deed could affect your credit rating for approximately 6 years.
- It could be difficult for you to get a mortgage loan in the future.
- You could be forced into selling your assets to pay off your creditors.
- Your trustee could assign someone else to run your business for you.
- In case you receive a windfall, it could be used to pay off your unwanted debts.
- Your trustee and your creditor could force you into applying for sequestration or bankruptcy.
- Your employment position could be affected in some cases.
- Your details are entered in a public register. This is known as the Register of insolvencies. This can be accessed by anyone.
- An insolvency practitioner is expensive, which only adds to the cost.
How will I be affected if I am a guarantor?
Since a guarantor receives no protection, your creditor could directly approach you to make payments.
Moreover, if you have unsecured loans that have not yet been paid, your house could be at risk. The creditor could force you into selling your house to receive their share.
Can my trust deed affect my credit rating?
Yes, your Scottish trust deed is likely to have an impact on your credit rating.
Your credit score could be affected for an estimated period of 6 years. This could make it difficult for you to take out credit in the future.
Will I lose my house in a trust deed?
If you are a homeowner, you could be asked to release the equity of your home.
In case you are unable to keep up with your monthly payments your trustee could sell your house in the benefit of your creditor.
However, this is highly unlikely. As long as you cooperate with your trustees and make your payments, you do not have to worry.
Will my protected trust deed affect my credit rating?
Yes, a protected trust deed could decrease your credit score significantly.
However, you could be able to rebuild your score after you have received your letter of discharge.
What will happen if my trust deed fails?
A failed trust deed may force you into a sequestration.
Your agreement could be terminated and the creditors might not approve on making another agreement with you
Moreover, the amount of interest and charges that were suspended before could be reapplied.
Furthermore, you may have to sell your assets to pay off your creditor.
Do I have to sell my home whilst in a trust deed?
In case you are the owner of your home, you could be asked to sell it in order to raise money to pay off your debts.
However, if you have little or no equity in your home you could be able to set up a protected trust deed.
Frequently Asked Questions (FAQs)
Will my mortgage be affected by trust deeds?
No, a trust deed can not be applied to your mortgage. This is mainly because a mortgage does not fall under the category of unsecured debts.
What does a default notice refer to?
A default notice is a type of reminder or a warning sent in case you have missed a monthly payment.
However, it could also be sent if you have paid less than your registered amount.
Once you receive the notice, you have two weeks to clear your payment.
Can my trust deed affect my employment status?
It is highly unlikely. However , in some cases it could pose to be a barrier. These jobs include Police services.
I would advise you speak to the Human Resource department or check your employment contract for clarification.
Is it possible for my trust deed to not become protected?
Yes, it is possible. A protected trust deed can be achieved only if your creditor agrees.
There is a high possibility that your creditor will vote against it.
I understand reading the disadvantages of a trust deed could make it seem intimidating. However, I assure you there is no reason to worry.
As long as you are able to make your monthly payments on time and cooperate with your trustee, you do not have to worry about anything.
It is important that you are well informed about the pros and cons before you enter into a trust deed agreement in Scotland.
I would advise you to read the article carefully for a detailed analysis.
For further information, please feel free to contact us.