If you’re looking into Trust Deeds, you might have read quite a few webpages telling you pretty much the same thing. On this page, we’re aiming to do something different – and tell you 10 things about Trust Deeds you might not have heard before.
The effect on your options
Once your Protected Trust Deed has begun, you won’t be allowed to apply for bankruptcy – or to enter a Debt Payment Programme (DPP) under the Debt Arrangement Scheme (DAS).
Your trustee’s advice
Before you sign a Trust Deed, your trustee is required to talk to you about the consequences of doing so. They also have to inform you about the alternatives to entering a Trust Deed. Depending on your situation, you might be better off joining a debt management plan instead, or a Debt Payment Programme under the Debt Arrangement Scheme.
Your trustee’s fees
Your trustee (the person who administers your Trust Deed) will charge you for the work they put in to your Trust Deed – and they’ll have to tell you how those charges will work out before you actually sign. You have the right to choose your own trustee.
Why your lenders might object
Your lenders will expect you to pay as much as you can afford into your Trust Deed. They won’t agree to it if they don’t think your offer is reasonable (if they think that you could pay more, or that you should be made bankrupt instead).
If enough of your unsecured lenders object to your Trust Deed and it doesn’t become protected, your lenders will be able to take you to court to try and recover the money you owe. The court may agree to make you bankrupt, if that’s what they request (which they can only do if they can demonstrate that bankruptcy would be fairer to them).
If you borrow any more money once you’ve signed your Trust Deed, you won’t be protected against action by your ‘new’ lenders. The terms of your Trust Deed are only binding on the lenders included in the original agreement.
A Trust Deed can’t directly help you repay secured debts (like your mortgage), but it can help you stay on top of them, since your Trust Deed payments would be calculated to leave you with enough for all your essential bills – including payments to your secured debts.
If your Trust Deed reaches a successful conclusion, your trustee will issue a ‘letter of discharge’ – your lenders will no longer be allowed to pursue you for the remaining debt. However, it won’t discharge you from certain debts, such as student loans, secured debts, fines imposed by a court and any liability that’s due to fraud.
If you’re thinking about entering a Trust Deed, Scotland is the only part of the UK where this could be an option. If you live in Northern Ireland, Wales or England, you may be able to enter an IVA (Individual Voluntary Arrangement), which is similar to a Trust Deed in many ways.
A change in your circumstances
Your payments into your Trust Deed are fixed before it begins, but that doesn’t mean they can’t be changed if your circumstances change while your Trust Deed is in progress. If your income increases, your trustee will probably decide you have to increase your contributions; if it goes down, they may let you make smaller payments, or ‘suspend’ them for a while.
If your trustee doesn’t think you’re cooperating, it’s unlikely they’ll agree to discharge you from your Trust Deed. If you don’t uphold your side of the arrangement, you’ll no longer be protected from your lenders – and your trustee can apply to make you bankrupt if they believe it’s in your lenders’ best interests.