Having unsecured debt could cause an immense amount of mental stress. It could also decrease your lifestyle significantly.
Not being able to pay off your debt only adds to the pressure.
If you are someone who is unable to pay off their unsecured debt. A trust deed could be the perfect solution for you.
This guide will give you a detailed insight of all the pros and cons of a trust deed. Moreover, it will help you understand which debt solution could be the best for you.
Read the article carefully, it will serve as the ultimate guide to resolving your debt problems.
How will I benefit from my trust deed?
A trust deed could help you reach financial stability. This means, it could help pay off all your unsecured debt.
Your trustee will decide an affordable monthly payment amount. This will exclude your disposable income and your living expenditure.
After your trust deed is approved your creditors can not contact or force you into making payments. The insolvency practitioners will deal with your creditors.
In case you are a homeowner, you could be able to retain your property if there is no available equity.
Moreover, you could be allowed to keep your car if it costs under £3,000.
Furthermore, your trustee could prevent you from applying for your own bankruptcy. You could be provided with another debt solution such as a Debt Arrangement Scheme (DAS).
After you have completed your payments, your remaining debts will be written off. This could be as early as four years.
However, the benefits could depend on the trust deed contract you sign. It could vary from person to person.
What type of debts are included in a trust deed?
I will list down the type of debts that could be included in a trust deed.
- Payday loan debt – your credit card
- Store cards
- Bank loans
- Catalogue debts
- Council tax debts
- HMRC – overpayments of benefits
- Mortgage of a previous house that you used to live in
To sum it up, you could include any type of unsecured debt in your trust deed.
What are the disadvantages of a trust deed?
I will list down all the drawbacks that you should be aware of.
- The rights of your assets are transferred to your trustee. This includes your property as well.
- Your creditors could prevent your trust deed from becoming a protected trust deed.
- Your trust deed could affect your credit rating for at least 6 years.
- If you are unable to make payments, your creditor could force you into a sequestration.
- In case you are a homeowner, your trust deed could be extended for 12 months.
- Your personal details will be added to the register of insolvencies.
- You could be asked to release the equity from your property.
- You could face some restrictions based on your employment.
- If your vehicles are worth more than £3,000, you could be asked to make extra payments.
- In case of a windfall, the money could be transferred to pay off your debts, in favor of your creditor.
Will my interest and charges get frozen in a trust deed?
Your interest and charges could get frozen in case of a protected trust deed.
After your arrangement is approved, your trustee will inform you about the costs or fees related to your PTD.
Can I apply for a trust deed if I have a low income?
You could get a trust deed on a low income if the majority of your creditors agree. However, this could be risky.
If you are able to make consistent monthly payments, setting up a trust could be easier.
However, if in the future you can not afford to pay, your trustee could sell your home.
I would advise you talk to your trustee about the other debt solutions available. You could apply for alternates such as debt management plan.
Frequently Asked Questions (FAQs)
Can I lose my house to a trust deed?
Since the ownership of your assets are transferred to your trustees, they could make this decision for you.
If you are unable to make monthly payments, your trustee may have to sell your house to pay off your debts.
What happens at the end of a trust deed?
After an estimated period of 4 years your debt payments will be completed.
You will receive a letter of discharge from your trustee. Moreover, any remaining debt will be written off.
Will I have to sell my house in case I apply for a trust deed?
No, you do not have to sell your house to apply for a trust deed.
If you have a stable income and can afford to make monthly payments, you could enter into a trust agreement.
This guide provides a complete summary of why a trust deed could be the best option for you.
A trust deeds application process might seem intimidating. However, the guide will help you understand the benefits associated with it.
For more information, feel free to contact us.