How much will my Trust Deed payments be?
If you live in Scotland and are thinking about starting a Trust Deed one of the most important things to understand is how much you will need to pay into the arrangement each month.
One of the fundamentals of this debt solution is that it allows you to reduce the payments you make to your unsecured debts each month so that they are equal an amount that you can afford.
You then pay this amount for a fixed period of three years. Any debt that is not paid after this time is written off.
Do I have to pay all my disposable income into my Trust Deed?
The monthly payments you have to make into your Trust Deed are based on your disposable income. This is the amount of money you have left from your monthly income after all your reasonable living expenses are taken into account.
In order to get your creditors to accept these payments you need to show them that you are making the best effort to repay as much of your debt as you can. To do this you will have to be prepared to pay all of your Disposable Income into the agreement each month.
But if you do this doesn’t it leave you with nothing left to live on?The answer to this is no. All the money you need to live on including an amount for emergencies and even sports and hobbies should be included in your living expenses. This is why it is vital to get your living expenses budget right.
Is there a minimum Trust Deed payment?
There is generally no minimum payment that is required for a Trust Deed as long as the amount you are proposing to repay is the best offer you can make.
Having said that the amount you pay into the Arrangement must be able to support both a sensible repayment to your creditors and the reasonable fees that the insolvency practitioner needs to deduct from your payments to pay for its running costs.
As such generally speaking unless it is known that your payments will increase at a later stage it is unusual to start with payments which are less than £100 a month.
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
Are the payments into an Trust Deed fixed?
A standard monthly payment Trust Deed will last for three years. The amount that you will pay each month during this time and therefore the amount that you will back to your creditors overall is agreed up front.
However a TD is flexible. This means that your payments do not have to be fixed at the same amount.
If you know that the amount you will be able to pay into your Trust Deed will change because you know your income or expenses will change, then these changes can be written into your proposal and agreed up front.
Of course you may face changes to your financial circumstances that you did not foresee. Perhaps changes to your living expenses or your income because of a job change.
Where this is the case it may be possible to change the amount you pay into your TD. However significant reductions in your payments will have to be agreed by your creditors in a formal variation of the agreement.
Can I pay off my Trust Deed early?
If you come into money while you are in the middle of a Trust Deed, this will normally have to be paid into the agreement on top of your normal monthly payments.
In affect paying a windfall into your TD like this will simply increase the amount you pay your creditors over all. It will not mean that your TD is paid early unless the amount you get is so great that all your original debt can be paid off.
In the same way, if you are able to increase your monthly payments this will not mean that your Trust Deed is paid early. It will simply mean that your remaining payments are larger and your creditors will be paid back more of their debt overall.
Having said that it is possible to pay off a TD early if a third party offers to pay in a lump sum on your behalf. This way your creditors are being offered a lump sum now which they would not otherwise be entitled to on the condition that you no longer have to make further monthly payments.
Never agree to make Trust Deed payments you cannot afford
When you are considering whether or not to start an Trust Deed, the most important thing to remember is that you must be comfortable that you can afford the monthly payments.
You creditors will compare your living expenses to a strict set of living expenses criteria which they believe are reasonable. If you believe you need to spend more meaning that the amount you believe you can pay into your TD is lower then you should always base your proposal on these amounts.
However you must be prepared for your creditors to reject your proposal on the basis that they feel your expenses are too high. You then have to decided whether you can live with the reductions they are asking for.
If so, then go ahead with the Trust Deed. However if you have doubts that you will be able to stick within the budget they are suggesting, you need to seriously consider whether it might be best not to use the Trust Deed.
Where this is the case you must take advise form a debt expert and perhaps consider using a different debt solution such as a Debt Arrangement Scheme.
If you agree to pay an amount that you cannot afford, your Trust Deed may well fail in a few months time because you cannot afford to keep up the payments. You will then have wasted time and money.
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