What is a Scottish Trust Deed?
A Trust Deed is a form of insolvency and a formal agreement between you and your creditors to pay back only what you can afford towards your debts.
Once Protected it is a legal way to help you back on the road to financial stability. A Trust Deed is designed for people who have debt and are struggling to meet their monthly repayments. A Trust Deed can help you write off unaffordable debt if you qualify and typically lets you pay back what is deemed affordable for 48 months.
There are benefits and considerations to a Trust Deed you must always understand first.
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Find out if you qualify
What is the criteria to be able to apply?
- You need to live in Scotland
- Your debts must be over £5000
- You must have a provable form of income
It will affect your credit rating
A Scottish Trust Deed will affect your credit rating. There is unfortunately no way to avoid this, although it is likely your credit record is already being affected if you have missed payments on your debts.
You may have to sell or remortgage
Granting a Trust Deed could mean that your house may be sold and you might have to move home, unless it is excluded under the legislation or you can make alternative arrangements. The exclusion terms are quite complicated and are set out in section 2.8 of the Accountant in Bankruptcy’s Trust Deed Guidance, but they generally apply only to your main residence if it has little or no equity. However, even if your property is not excluded you may be able to agree to make additional payments into your Trust Deed in lieu of the equity or arrange for a remortgage or third party contribution, to pay for any equity within your home, so you have several options to avoid having to sell. More information of how Trust Deeds can affect your property can be found here. A Scottish Trust Deed may also require you to sell high value items to raise funds to pay your creditors. You will not be expected to sell basic household items such as your TV and computer and you can keep your car if you need it for work and family purposes. The only exception to this is if the car is high value and you may be expected to downsize to something less expensive. If you pay into a pension, you may be required to reduce your payments or stop making payments until the Scottish Trust Deed is complete.
Only unsecured debts are covered
Only unsecured debts are covered by a Scottish Trust Deed, so any loans secured on your home or through hire purchase agreements are not covered.
It will be advertised
When you grant your Scottish Trust Deed, it will be recorded on the Register of Insolvencies, which is a public record.
Don’t miss a payment
If you fail to make a payment under your Scottish Trust Deed agreement without first contacting your Trustee for discussion and permission, you may find the Trust deed could fail and you will not then be discharged from your debts. It is sometimes possible to arrange payment holidays or to extend the timeframe of the Scottish Trust Deed in exceptional circumstances, so it’s important you let your Trustee know as soon as you think you might not be able to make a payment.
Don’t take out more debt
If you run up any new debts in addition to those within your agreement, your new creditors will be able to pursue you for your new debts. Your existing Scottish Trust Deed does not cover debts incurred outside the agreement. This is why it is extremely important for you to declare all of your debts to your Trustee at the beginning.