We receive enquiries into the charity from time to time requesting information and one interesting question we received was, “Can I enter a short term Trust Deed”?

A Protected Trust Deed is typically a 4 year debt solution, however for some people the debt solution can be shorter. The solution used to typically be 3 years but changed in November 2013. A short term Trust Deed is also known as an equity or lump sum Trust Deed.

The Scottish Trust Deed Solution

Some people in Scotland are suitable to enter a Protected Trust Deed to resolve troublesome debt problems. The solution allows a person to make one affordable monthly payment to their debt each month, usually for 4 years and at the end of the solution any remaining debt is written off.

In a Trust Deed assets with equity must be released, however people are able to keep hold of assets like their house and car.

The interest and charges in a Scottish Trust Deed are frozen and written off at the end of the solution.

Short Term Trust Deed Solution

A Trust Deed may not always last for 48 months, although it can last for longer too. For a lump sum Trust Deed the length of time can be as short as 6 months, although it’s usually around 1 year in order to conclude and close the solution.

The short term option is a proposal where you offer one payment as a full and final settlement. If you can afford to repay 70% or more of the debt in a full and final settlement you may wish to try and do this informally first by contacting each creditor and offering them a pro-rata offer. If your lump sum is less than 70%, or you want the legal protection from your creditors, you may consider entering into a Trust Deed to resolve your debts.

Example of a lump sum Trust Deed

When a Trust Deed proposal is suitable it is drafted and offered to each of your creditors. If you are unable to make any monthly contributions towards your debt because you have no disposable income each month, then a lump sum payment could be accepted.

Usually short term Trust Deed plans where a lump sum is offered to the creditors, the money is offered from friends and family or from the sale of an asset, like a house. For example, if the property is:

Debt – £30,000

Lump sum amount – £15,000

Length of time in the Trust Deed – Under 1 year

A lump sum Trust Deed would have no reason to last for 4 years because it would only add extra charges to the case without any extra money being brought in for the creditors.

If you would like specific advice on an equity only Trust Deed then you can call Debt Support Trust on 0800 085 0226, or complete our debt test to find out if a Trust Deed would be the right debt solution.