You will find lots of advertising about a Scottish debt solution on TV called a Protected Trust Deed, however most people will have no idea what the solution is and whether they are applicable for it. There are positives and negatives to a Protected Trust Deed and it’s important to know all of the facts before deciding on your debt solution.
Entering a Trust Deed Scotland
1. Credit File: Your credit file will be affected by entering a Protected Trust Deed. A default will be added and this will last for 6 years.
2. 3 years debt free: Typically people entering a Trust Deed to become debt free are in the solution for 3 years, however the Trust Deed can be shorter or longer depending on your financial situation. If the Trust Deed is shorter it may be because you don’t have any available income and instead are offering equity from an asset. The Trust Deed may be longer in order to meet the minimum 10% return to creditors.
3. Monthly Disposable Income: Your disposable income is required for the Trust Deed. Your disposable income is the difference between your income and your expenditure. The monthly disposable income is paid to your Trust Deed practitioner. Your insolvency Trust Deed practitioner will take their fees from the money you pay in every month.
4. Inheritance / Windfall: If you come into money during the period of the Trust Deed you must inform your trustee. The trustee will likely want to include this money within your Trust Deed.
5. Your house & other assets: Your house and car will be considered in a Trust Deed. The insolvency practitioner is only interested in the equity within these solutions. For instance, if there is equity in your car above £3,000 then you may be asked to sell this and purchase a cheaper car. If you have a mortgage on your house then a redemption value will be obtained to understand how much equity is in the house. If there is no equity then you may be offered to pay a nominal fee at the start (roughly £500) to discharge your trustees interest in the property. This means that if your property increases In value at the end of the Trust Deed then this equity cannot be included in your Trust Deed. If your property has equity, usually above £5,000, then this will have to be included in your Trust Deed, typically via a remortgage or from a third party.
6. Your bank account: If you owe money to your bank where your wages are paid into then you should change to a basic bank account with a creditor you don’t owe money too. Your bank has the right to offset your wages / income against your debt if they know you are entering into a Trust Deed. This can mean your bank may take money directly from your account without your permission. Your bank account, and other debts, will also be frozen when your enter a Trust Deed so a fresh account is best.
7. Six Monthly review: Every 6 months a Trust Deed company must complete a review of your finances to determine if anything has changed. So, if your disposable income has increased you may be asked to contribute more towards your Trust Deed in the future. Similarly, if your disposable income has gone down then your monthly payments will be lowered. If your payments are lowered too far it can mean the Trust Deed is no longer viable, or that the solution would be extended at the end to meet the dividend return to creditors.
8. Bonus/ Overtime: If you receive a bonus or overtime from your employment then this will be taken into account, with 50% of the money being asked for the Trust Deed.
9. There are other Scottish debt solutions: It’s important to remember that there are other Scottish debt solutions available which you may wish to consider, like a DAS or Sequestration.
10. Discharged from Trust Deed can take time: After you complete your Trust Deed payments, usually after 3 years, the Trust Deed company will then have to close your case. This can take a little bit of time because they have to make payments to each of your creditors and produce final reports. Don’t be surprised if it takes a few months to close your Trust Deed.
Finding a Trust Deed company
There are around 50 licenced insolvency practitioners providing Trust Deed for people struggling to manage their debt. You should speak to a couple to decide which organisation is correct for you. Remember, a licenced insolvency practitioner will charge fees for their service.
If you need help deciding if a Protected Trust Deed is right for you then contact Debt Support Trust on 0800 085 0226 or complete our debt analyser form.
Debt Support Trust is an independent and impartial debt advice charity.