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Is a Trust Deed suitable for me?

Trust Deeds are only available for people who are currently living in Scotland (or have lived in Scotland sometime during the last year).

If you are currently living in Scotland but when you originally borrowed the money that you owe you were living elsewhere, this does not matter. You now fall under the jurisdiction of Scottish law and you will be able to consider a Trust Deed to resolve your debt problem.

If you are currently a resident in England or Wales you are not eligible to take advantage of the Trust Deed solution and should consider one of the debt solutions available under English law such as an Individual Voluntary Arrangement (IVA).

Are your debts unsecured?

You can only include unsecured debts in a Trust Deed. These include debts like credit cards, personal loans, catalogues, pay day loans and bank overdrafts. Note: You can not include a student loans company debt or certain court fines in a Trust Deed.

You cannot include secured debts such as a mortgage or secured loan in a TD. As such if the only debt you have is secured, then a TD may not be for you.

How much unsecured debt do you have?

There is no legal minimum amount of debt to qualify for a Trust Deed. However, in reality Trust Deed companies vary in the minimum amount of debt you need to be in before they will take on your case.

Generally speaking your unsecured debts should be £5,000 before you consider a trust deed. If your debt is less than £5,000 then a better solution for you could be a Debt Arrangement Scheme (DAS).

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 you insolvent?

You can only carry out a Trust Deed if you truly cannot afford to pay your unsecured debt. To confirm this you will have to review your income and expenditure budget. If your disposable income is not high enough to maintain your normal monthly payments then you are insolvent and may be able to carry out a TD.

Your expenditure budget will be looked at very carefully to make sure that you are not overspending in any areas and that your expenditures are reasonable. You will normally have to back up your monthly expenditures with paperwork (such as a mortgage or rent statements and copies of recent bank statements).

If you can continue to make your normal monthly debt repayments by simply cutting back or spending less on luxuries, then you will not be eligible for a TD.

What happens to your home in a Trust Deed?

If you start a Trust Deed and you own equity in your property, 100% of this will need to be realised at some point during the Trust Deed.

Before you start a TD, you will need to measure the amount of equity in your property. Once your TD starts, the Insolvency Practitioner (sometimes known as a Trustee) who manages the arrangement will take ownership of your equity and will ultimately be required to realise it for the benefit of your creditors.

BMD Tip: Dealing with home equity is one of the main areas of confusion and frustration with Trust Deeds. As such, it is vital that you know where you stand. You must get clear written clarification from your IP as to how your equity will be dealt with prior to signing your Trust Deed agreement.

No equity or negative equity 

If there is no equity in your property, you can pay £500 to buy out the insolvency practitioner’s interest in the property. Make sure you insist that this is done at the beginning of your TD and that you receive written confirmation that the IP has no further interest in your property.

If you do not do this and your property rises in value while you are in your TD, you may well be required to realise any new equity raised before your TD is allowed to finish.

Positive equity

As part of your TD, your IP is required to release 100% of any equity you own. Generally the amount of equity available in your property is measured either at the beginning or end of your TD.

If you measure the amount of equity at the beginning of your TD but are unable to pay this immediately then it is possible that your IP will revalue your property at the end of the arrangement and take this value.

Clearly, a new valuation could result in the amount of equity moving up if the value of your home has increased or down if the value has reduced. It is therefore very important to understand in advance what happens in these circumstances. I.e. will the new equity calculation be used even if it is lower than the original? You must get an assurance from your IP in writing as to how equity will be recalculated at the end of your TD.

What if equity cannot be raised?

If you come to the end of your TD and you have equity in your property which you are unable to raise, in certain circumstances it may be possible to extend the monthly payments you make to cover the loss.

However, generally speaking this is only really an acceptable solution if it is not going to take an excessive period of time to contribute the funds.

What happens to your car in a Trust Deed?

Generally speaking if you need your car to get to work or for other reasonable requirements, you will be able to keep it if you carry out a Trust Deed. However if the car is worth more than £3000 the value above £3000 will have to be released and paid into the Arrangement.

Once again it is important that you insist on receiving a written record of how your car will be dealt with before signing a Trust Deed agreement.

Other Debt Solutions might be suitable for you

A Trust Deed is not the only debt solution which might be suitable to resolve your debt problem. Before making your final decision to apply for a Trust Deed you should also consider the other available debt solution options.

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