A standard monthly payment Trust Deed involves making payments towards your debts every month for a period of 4 years.
However if you cannot afford to make monthly payments you can still use a form of this debt solution if you can make a lump sum of cash available. This is commonly referred to as a Full and Final Settlement or lump sum Trust Deed.
The solution is based on you making a single lump sum payment so your creditors receive their cash as a single one off amount.
What are the benefits of a Full and Final settlement Trust Deed?
Trust Deed completed immediately
No. By law a Trust Deed must remain open for 4 years. If you offer a lump sum rather than monthly payments the Arrangement must remain open for 4 years. If your income improves during this time montly payments may then be required.
More debt written off
Because your creditors receive their payment up front, they will normally agree to receive slightly less than a traditional 48 month payment Trust Deed.
Do you want help to start a Full & Final Settlement Trust Deed? Give us a call on 0800 077 6180 or complete the form below to speak to one of our experts
How much will I have to pay into a Full and Final Settlement Trust Deed?
The amount of lump sum required for a full and final settlement TD will depend on the amount that you owe.
When making the proposal to your creditors, your insolvency practitioner will normally consider the amount that you would be required to pay using a normal monthly payment plan and whether there is any equity in your property.
Normally the total lump sum you will have to pay will be less than what you would have paid using a standard monthly payment TD in light of the fact that the risk to your creditors is reduced as they are receiving payment up front and in one go.
How to get the lump sum required for a Full and Final Settlement
The key to being able to carry out a full and final settlement Trust Deed is being able to come up with a cash lump sum. There are a number of places where this might come from.
A gift or loan from family or friends
The most common source of cash particularly if you have little or no assets and no disposable income is from a third party. If a friend or family member can lend you the money this is an ideal scenario. They will simply have to prove that the funds are available and the source is reputable perhaps in the form of a bank statement before yourTrust Deed proposal is made to your creditors.
A windfall such as a redundancy payment
If you have recently received a lump sum payment this can also be used to fund a full and final settlement Trust Deed. Such a sum might have been received due to an inheritance or compensation payment. It is also possible to use part of a redundancy payment particularly as it is unlikely that you will then have an ongoing income with which to pay into an Arrangement on a monthly basis.
Equity released from your property
Up until 2008 it was common for home owners to be able to release money from their property by remortgaging which could then be used to achieve a full and final settlement Trust Deed. However more recently it has been more difficult to re-mortgage and so this option has become far more difficult to achieve.
Can I settle with a lump sum if I have already started a normal Trust Deed?
If you have already started a normal monthly payments Trust Deed it is possible to settle the Arrangement early. However you would be required to pay the full amount of debt you originally owed (less any payments already made) plus Trustee’s fees plus statutory interest at 8% pa from the start date of the IVA.
It might be possible to raise this sum if the value of your house has unexpectedly increased or friends or family agree to help you raise the amount.
In these circumstances, your TD will be closed and you will stop making your normal monthly payments.
If you receive a windfall during your trust deed this will have to be paid into the Arrangement in addition to your ongoing monthly payments.
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