Trust Deed

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What is a Trust Deed?

A trust deed is a voluntary agreement between you and the people you owe money to (also called your creditors). You agree to pay a regular amount of money towards your debts and at the end of a fixed time the rest of your debts will be written off.

All your belongings and property (your assets) are passed to someone who will look after your financial affairs. They are called your trustee. The trustee aims to pay your creditors as much as possible of the debt owed to them. This may involve some of your belongings or property being sold so that the money raised can be paid to your creditors.

A trust deed can become ‘protected’ if the majority of creditors are happy with the terms of the trust deed. This means that the trust deed is binding on all creditors and they cannot take any steps to recover the money owed to them.

If a trust deed is not ‘protected’ then it will not be binding on all of your creditors and they could still take action to recover the money you owe them.

A trust deed is only one of the options available to you if you have debt problems. You should get advice from a money adviser to help you decide what is the best option for you.

Trust Deeds are only available in Scotland.

Worried about your Trust Deed?

If you are worried about how you are going to work towards your Trust Deed, we’re here to help you! There are many people who will be considering a Trust Deed solution. Here at Business Helpline, we can discuss all of your options and help you plan for a better future.
Call our team today on 0800 088 2142.

Am I eligible for a Trust Deed?

A trust deed might be an option for you if you have:

▪️ debts of £5,000 or more

▪️ enough money to make a regular contribution towards your debts. You can’t set up a trust deed if your only income is from benefits

▪️ belongings and property (assets) such as savings, investments, a car or a house. These can be sold so that the money raised can be paid to creditors.

What are the benefits of a Trust Deed?

▪️You cannot be contacted by people who you owe money to

▪️ You cannot be the subject of enforcement action

▪️You are not prevented from certain types of employment

▪️ You can still legally borrow money, even if it will be harder to fully negotiate

▪️Your debts will be wiped out

What are the risks of a Trust Deed?

▪️ You have to make regular payment contributions for 4 years

▪️ Your credit rating will be affected for 6 years

▪️ You might have to sell your property or assets

▪️You can’t be the director of a limited company unless the specific terms

▪️You might not be able to continue running your business if you are self employed

▪️New money that you claim throughout the Trust Deed process can be taken from the Trustee

▪️Trustees can apply to make you bankrupt if you do not cooperate with them

How much income do I need for a Trust Deed?

You will usually need to have enough income left over after you have paid for essentials (called disposable income) to make a contribution towards your debts.

Disposable income is assessed by working out your usual income and expenditure over a month. Then you can see if you have any income left after you have paid for all your essentials.

If you don’t have any assets, such as savings, or property such as a car or a house, then you will need to have enough disposable income to pay towards your debts during the existence of your trust deed.

What will happen to my home in a Trust Deed?

If you own your own home and you set up a trust deed, you may have to sell it in order to raise money to pay towards your debts.

In some cases, if you have little or no equity in your home, you may be able to set up a type of protected trust deed which does not include your home. (The equity in your home is the amount of money that you would have left after selling your home and paying off the mortgage.) You can only exclude one home from your protected trust deed and it must be the only or the main place that you live.

If your trust deed does include your home, you have family living with you and your trustee does want to sell the home, you can apply to the sheriff court to ask for the sale to be refused or delayed for up to 3 years.

What happens to joint debts in a Trust Deed?

If you share a debt with someone else this is called ‘joint and several liability’. If you take out a trust deed the other person can be pursued for the whole debt. The joint debt is listed in the trust deed but no payments are made towards it by the trustee. It is possible for you both to have a trust deed but you should both discuss with the trustee whether or not this would be advantageous.

If the relationship has broken down then joint debts are one of the issues that should be discussed as part of all the financial circumstances of the relationship.

Do I have to tell my partner if I go into a Trust Deed?

You do not have to inform your partner about your trust deed. However, we recommend that you do in order to be as transparent as possible. If debts are joint in name then your partner would have to be informed anyway.

Will my name be viewable in the papers?

The trustee must place a note in a legal paper called the Edinburgh Gazette, however, this cannot be bought on the high street. The Edinburgh Gazette is specifically aimed at financial institutions, like banks and building societies, as well as Insolvency Practitioners.

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Trust Deed FAQs

How long do creditors have to object my Trust Deed?

It is unlikely that your bankruptcy will be rejected. However, there are some circumstances where this can happen.

To be made bankrupt, you must meet certain criteria. You must be unable to pay your debts, not currently in a Debt Relief Order and your centre of main interest must be in England or Wales (however there are certain circumstances where this does not have to be the case).

You can go bankrupt even if your payments are up to date. The fact you have paid them on time up until now does not mean that you are able to pay and keep up with your debts by yourself. It is likely the only way you have managed to do so is by borrowing more each month.

What happens if I lose my job or become ill?

Notify Trustee who will require details of any redundancy and severance payments. If only temporary then Trustee can suspend monthly payments until you resume work again.

You should notify the trustee of any redundancy and severance payments. If you are only out of work temporarily, you can ask the Trustee to suspend monthly payments until you start work again.

Can a Trust Deed be finished early?

A Trustee can ordinarily accept a lump sum to complete your payment at any time. They will need to verify where you get that money from, however.

How are my payments worked out?

Payments are based on two thirds of your disposable income, with relation to a minimum payment of £250 a month over a period of three years.

If your disposable income increases through extra income or savings in essential expenditure, the Trustee will ask for a higher amount in monthly contributions.

Do I have to sell my shares in a Trust Deed?

The Trustee should collect the value of all investment that you hold through a sale. Alternatively, they can extend the period of your Trust Deed to allow for additional payments to be made. Third-party payments can also be accepted.

Is my pension affected in a Trust Deed?

Creditors have no direct claim against you or your pension. Nonetheless, your Trustee must access your ability to pay monthly contributions from all income sources. This includes your pension benefits.

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