As a Scottish Trust Deed company, our focus is always to help you through the journey that is dealing with debt. But have we ever stopped to give you the explanation you need?
We champion the ability to not let your debt become the elephant in the room, and we understand that there’s a lot to think about when it comes to being in a formal debt solution like a Trust Deed. That’s why we’re giving you the answers to the top ten questions that you ask every day.
Before we get into the nitty gritty, it seems proper to explain that some of these answers may differ depending on circumstances and may not apply to everyone. There isn’t a one-size-fits-all answer to anyone’s money problems, and we will always work to make sure that we take the course of action that’s right for your situation.
With that in mind, let’s get into some of the most common questions we hear around one of the most common voluntary agreements, a Trust Deed:
1. Can I add debts to my Protected Trust Deed?
It is possible to add debts after you’ve gotten your Trust Deed protected, but this is dependent on a few things.
It can be difficult to remember all your creditors when you’re dealing with debt and in some cases, they will only be flagged to you afterwards. In these cases, all we request is a copy of a statement/letter from the company you owe money to that shows the outstanding balance and reference number.
Once we have this information, the licensed Insolvency Practitioner overseeing your Trust Deed will contact the company you owe. They will then advise them of your arrangement and ask them to stop all action and submit their claim in order to be paid.
However, it’s important to note that if the debt was taken out after your Trust Deed was protected or if the debt is found to be of criminal or fraudulent nature, then we would not be able to add it to your arrangement. If this is the case, you will need to arrange to pay this debt outside of your Trust Deed and we will alter your expenditure to suit.
2. What happens if I come into money during my Trust Deed?
It’s written into the terms and conditions of your arrangement that if you are due to receive any surplus income on top of your disposable income during the Trust Deed period, this will be used to raise money to pay your creditors.
This is because more money is considered to be an asset by your creditors and will be classed as money raised towards your debt.
If the lump sum is enough to cover your debts in full (plus all interest and fees), then we will use it to settle your balance and pay any leftover funds back to you directly.
This works in a similar way to how windfall payments are treated in an Individual Voluntary Arrangement (IVA).
3. What should I do if my circumstances change during my Trust Deed?
You’ll be required to attend annual reviews with your Insolvency Practitioner during your Trust Deed. The purpose of these meetings are to provide copies of pay slips and bank statements to check your personal details, income, and expenditure are up to date and make amends if necessary.
It’s rare that your financial affairs will remain unchanged for four years, and we understand that anything can happen. That’s why we have processes in place to prepare for this.
If you experience a change of circumstances, such as the loss of your job or a terminally illness, you must notify us as soon as possible. We will reassess your income and expenditure to ensure your payments remain affordable.
However, if it’s an emergency situation or the change isn’t permanent, then you have the option to request a ‘payment break’ for up to six months to give you enough time to resolve the issue. For this to be put in place, you will need to provide evidence to show the reason you cannot make the payment and you may have to make additional payments.
4. Can I take out credit while I’m in a Trust Deed?
As a rule of thumb, we advise our clients against borrowing money while in a Trust Deed. This is because your arrangement will signal to lenders that you haven’t been able to manage your debts before and you might struggle to afford another monthly payment.
If you find yourself in need of credit for an emergency or to help you fund something that is needed for daily life, it’s important to speak to us first. Depending on the amount you need and the reason why, you might need permission from your Trustee before proceeding.
Any credit that you take out once you have entered into a Trust Deed will not be included in your repayment plan so you will need to continue to make the monthly payments outside of your arrangement. If you fall behind on these repayments, these debts won’t be protected by your Trust Deed so lenders are within their rights to add fees and charges as well as pursue debt recovery action against you.
5. What happens once I’ve made my final payment towards my Trust Deed?
Once you’ve made all your payments towards your Trust Deed, your case will be passed to our closures department so they can complete all the necessary administration work needed for the Trustee to discharge you.
As long as you’ve met all the necessary obligations of the Trust Deed and nothing is outstanding, then you will be sent your discharge papers. At this stage, any remaining unsecured debt that was included in the Trust Deed but not repaid will be written off.
Additionally, creditors will no longer be able to chase you for this money owed or take any further action against you to recover the balances as they are no longer enforceable.
6. How does being in a Trust Deed affect my credit rating?
A Trust Deed is a personal insolvency solution, so it will show on your credit file from each of the main credit reference agencies for six years from the date your Trust Deed begins and your credit score will decrease.
This means that, if your Trust Deed lasts the standard four years, it will still be visible on your credit file for another two years after your arrangement ends.
While a Trust Deed is on your credit file, you’ll find it difficult to find a lender willing to give you further credit as it shows that you’ve struggled with debt recently and might find it difficult to afford another monthly payment. Put simply, you’ll find it difficult to qualify for a loan, credit card, mortgage, phone contract, and even a bank account.
However, while it will be difficult to obtain credit during this time, it’s not impossible. For example, if you’re looking for a mortgage with a Trust Deed on your credit file, a specialist lender might be able to find a deal for you, albeit with higher interest and stricter terms.
7. What should I do if I can no longer afford my Trust Deed payments?
If you’re struggling to afford your agreed-upon monthly repayments towards your Trust Deed, you should contact us immediately to make us aware of the situation. The sooner you let us know about your personal circumstances, the sooner we’ll be able to find another solution or you.
If you miss a payment on a legally binding agreement without giving us sufficient notice, you’ll be in breach of your arrangement and will be at risk of it failing. When this happens, we will contact you to ask why you’ve missed a payment so we can keep your creditors informed.
Your Insolvency Practitioner will discuss all available options with you to find a resolution, which could include reducing your contributions to an affordable monthly payment for a fixed period or exploring alternative insolvency solutions, such as a Debt Payment Programme (DPP) under the Debt Arrangement Scheme (DAS) or sequestration.
8. What happens when my Trust Deed fails?
A Trust Deed is a legal agreement, which means you must agree to the terms and conditions outlined in your proposal. If you break any of these rules, your arrangement will fail.
When your Trust Deed fails, you’ll become liable for all of the debts included and interest, fees, and creditor contact will resume. Your creditor could also take legal action against you to recover payments, which could include petitioning the court for the sequestration of your estate, which essentially forces you into bankruptcy.
Missing several Trust Deed payments without providing an explanation can also lead to a situation where future payments towards your remaining debt are taken directly from your earnings.
9. Which debts can be included in a Trust Deed?
If you’re considering a Trust Deed to help you deal with your unaffordable debt, it’s important you know which debts can be included. If the majority of your total debt can’t be included, another solution might be better suited for you.
Most unsecured debts can be included in a Trust Deed. This includes credit cards, overdrafts, payday loans, store cards, personal loans, utility arrears, Buy Now, Pay Later agreements, and credit cards.
The debts that can’t be added to your Trust Deed include secured debts like mortgage payments, court fines, hire purchase agreements, and student loans.
10. What if my creditors object to my Trust Deed proposal?
In order for a Trust Deed to become protected, the creditors that you owe two-thirds of your debt to must accept the terms outlined in your proposal. As long as this is the case (even if a third of your creditors reject it), your arrangement will become a Protected Trust Deed and all of your creditors will be legally bound by its terms.
If your Trust Deed is rejected, it won’t be protected and your creditors could still pursue recovery action against you to recover the debt. Some creditors might prefer to petition for your sequestration if they believe they would recover more of the debt this way.
If you have any questions that we haven’t answered here, call us on 0800 043 1320. Our money advisers are available to guide you through your Trust Deed and give you expert debt advice on other debt solutions better suited to your particular circumstances.
Alternatively, Money Helper can be contacted for free debt counselling, debt adjusting, and credit information services.
