Are my Trust Deed payments fixed?

If you start an Trust Deed we ask whether your monthly payments will remain fixed or whether they could change for any reason.

One of the attractions of a Trust Deed is that if you are struggling with your debts the arrangement will allow you to reduce your monthly payments so that they fit into a single affordable amount.

In a standard agreement your monthly payments will last for a fixed period of three years. After your final payment (notwithstanding that homeowners might have to release equity), any debt that is left outstanding will be written off and you will be free of your unsecured debts.

When are Trust Deed payments agreed?

The amount of the payment that you make into your Trust Deed will be agreed up front with your creditors before it starts. After your creditors accept your proposal it then becomes known as a Protected Trust Deed and they cannot then go back on the deal and ask for more money.

In this sense the payments you are required to make into the Agreement are fixed. However one of the conditions that you agree to is that if your circumstances improve for any reason and your disposable income increases, you will then increase your monthly payments.

What happens to your Trust Deed payments if your Income changes?

If your income improves your Trust Deed payment does not automatically increase by the same amount. First your income and expenditure budget will be reviewed and any increase in your living expenses associated with your increased income will be taken into account.

So for example if earning your increased income means that your childcare costs increase you will only be expected to increase your Trust Deed payments by the amount left over once the additional childcare costs are covered.

Of course this condition of your Trust Deed works both ways. If your income falls through no fault of your own, it is possible to reduce the payments that you make each month.

However the opportunity to reduce your monthly Trust Deed payments will always depend on whether your Trust Deed will still remain financially viable. If your payments fall below a certain amount this may mean that it is impossible to continue with the arrangement and it will fail.

Do you want help to start a Trust Deed? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts

What happens to your Trust Deed payments if your living expenses change?

The amount that you pay into your Trust Deed is largely dependent on your monthly living expenses. In the same way as if your income were to change, a change in your living expenses could mean that your Trust Deed payment will be revised up or down.

If your living expenses fall, you will be expect to pay the amount saved each month into your Trust Deed meaning that the overall amount that you pay back to your creditors will increase.

The most common example of this is when a car hire purchase agreement comes to an end. You will then be expected to transfer what you were paying to the HP company into your Trust Deed for the remaining months of the arrangement.

If your living expenses rise for a specific reason, then in the same way as if your income had fallen, it may be possible to reduce your Trust Deed payments so that they are more affordable.

Generally speaking to gain agreement for your Trust Deed payments to be reduced, the reason behind the increase in our living expenses must be tangible.

For example if your job location changes and it becomes more costly to travel to work this is a clearly measurable increase in living expenses. However it is unlikely that you will be able to simply reduce your Trust Deed payments because of a general rise in the cost of living unless you can prove that your circumstances have been specifically affected.

Could the length of your Trust Deed change if your payments change?

The time that you will pay into your Trust Deed debt solution will be agreed at the beginning of the arrangement. Generally speaking this will be for a standard period of three years (36 months).

This Trust Deed payment term is normally fixed however there are some circumstances where the period might be extended.

One of the most common reasons for a Trust Deed to be extended is that during the arrangement you agree with your insolvency practitioner (IP) that you will take a payment holiday. A payment holiday may be agreed by your IP to get you through a period of unemployment or other financial crisis.

The months of payments that you miss due to a payment holiday will normally be added to the end of your Trust Deed thus extending the length of time that you will have to pay.

Your Trust Deed might also be extended if you have to reduce the monthly payments that you make because of a reduction in income or increase in living expenses. Your creditors could ask for this extension to ensure that they are repaid the same amount overall.

Pay as much as you can into your Trust Deed

The golden rule to remember with a Trust Deed is that it is a way to repay as much of your debt as possible in a controlled and sensible way.

It is true that the amount you are expected to pay into your Trust Deed will be agreed up front. If your circumstances do not change, then your payments will remain the same.

However it is important to understand that if you do have changes to your income or specific changes to your expenditure then it is certainly possible that the amount you pay into your Trust Deed will change accordingly.

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