Before you make a decision about whether or not to start a Trust Deed you may want to consider some of the advantages and disadvantages of the solution. Some of these are highlighted below.
As you go through these you should remember to consider them in the context of your own situation as they may not all be relevant to you.
More often than not an advantage or disadvantage which is important to one person may actually be unimportant or irrelevant for another. As such this type of debt solution will be simply more or less suitable for you given the context of your personal financial situation.
The main Advantages of a Trust Deed
1. Single affordable payment
A Trust Deed allows you to make a single affordable payment to your creditors each month normally for the period of 4 years. This is paid directly to your Insolvency Practitioner who will deal with your creditors on your behalf. All future letters and correspondence from your creditors will be dealt with by your Insolvency Practitioner.
2. Legal protection from further creditor action
When your Trust Deed becomes protected, pressure from your creditors goes away. Your creditors cannot take any further action against you to recover their debts. For example creditors can no longer take court action resulting in an attachment of earnings, charging order against your property, warrant sale of household goods or a petition for your bankruptcy.
3. Interest and charges frozen
As soon as your Trust Deed becomes protected, your creditors are stopped from adding any further interest or charges to your accounts.
4. Debt written off
A Trust Deed will usually last four years. At the end of that term any outstanding debt which was included in the arrangement is effectively written off.
5. Discreet procedure
Other than in the Edinburgh Gazette, a Trust Deed is not advertised and your employer is not informed. It is possible for individuals who have Protected Trust Deeds to continue to hold certain public offices, remain as directors and for companies to continue to trade.
6. Better return for creditors
A Trust Deed will provide a better financial return to your creditors than bankruptcy (sequestration).
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
The main Disadvantages of a Trust Deed
1. Credit rating effected
Your credit rating, and therefore your ability to access credit, will be affected significantly by a trust deed.
The trust deed will be recorded on your credit file and this record will remain for a period of six years from the date that the TD started. Missed payments before the start of the trust deed, and any default notices issued by your creditors, will also remain on your credit record for six years from the date they were added.
These issues will affect your ability to get credit and the terms upon which credit might be offered.
2. Home equity must be released
If you are a home owner, 100% of any equity in your property at the time your Trust Deed is protected will have to be realised for the benefit of your creditors.
3. Failure may result in bankruptcy
If your circumstances change, and your insolvency practitioner can’t get creditors to accept amended terms, the Trust Deed is likely to fail. You will still owe your creditors the full amount of what you owed them at the start, less whatever has been paid to them under your Trust Deed.
If your Trust Deed fails, bankruptcy (or sequestration ) proceedings may be taken against you. As such, your home and other assets may be at risk.
4. Name included in Insolvency Register
Whilst your name is not published in the newspaper, it should be pointed out that your Trust Deed will be entered onto the Accountant in Bankruptcy (AiB) Register of Insolvencies which is a searchable public database.
5. Restrictions for Sole Traders
If you are self-employed, there may be some restrictions on your ability to trade. A Trust Deed can however, allow for alternative arrangements to be made available in order to allow trading to continue for future income.
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