When you enter into a formal debt solution like a Trust Deed, it’s normal to worry about how it could affect other areas of your life, such as your career and employment prospects.
Unless you work in a few select professions, a Trust Deed won’t have an impact on your job and you should be able to continue working without any problems. You may not even have to inform your employer and, in most cases, they won’t find out unless they’re one of your creditors.
In this article, we’ll explore the relationship between Trust Deeds and employment in greater detail so you can know what to expect from your arrangement, whether you’re already in one or considering applying for one.
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What is a Trust Deed?
A Trust Deed, or Scottish Trust Deed, is a formal debt solution that allows you to pay off your unsecured debts through a series of monthly repayments based on a review of your income and expenditure.
The average Trust Deed lasts four years, although a longer payment period may be considered if your financial situation changes. Once you’ve made your final payment, the remainder of your unmanageable debt will be written off and you’ll be free to move on with your life.
Before your Trust Deed is approved, you will be appointed a ‘Trustee’, who is a financial professional authorised to review your finances, oversee your arrangement, and liaise with your creditors to ensure they receive their monthly contributions.
When you enter into a Trust Deed, you’ll be required to hand over control of any high-value assets you own, including your home and your car. However, while you may need to release equity, you should never be forced to sell your home.
Like most debt solutions, your Trust Deed will be listed on your credit file and a public register known as the Register of Insolvencies (ROI). This will have a negative effect on your credit score down and make it difficult to be approved for credit.
How does a Trust Deed affect employment?
When you enter into a formal debt solution like a Trust Deed, it’s important to be aware of the various ways in which it could affect your employment prospects.
For example, you must be able to prove you have sufficient disposable income and can afford to pay at least £150-£200 into your arrangement each month before you can begin making payments. Benefits also can’t be used to repay debt in a Trust Deed.
You may also worry about the embarrassment of having your employer know you’re experiencing financial trouble or fear that your employer will judge or fire you for not telling them that you are in a Trust Deed. However, in most cases, there’s no need to worry.
Does my employer have to know I have a Trust Deed?
Because there’s no legal obligation to inform your employer that you’re in a Trust Deed, it’s extremely unlikely that they will find out unless they’re one of the creditors included in your arrangement or you work in a number of key professions.
However, if your employer does question you about being in a Trust Deed, it’s important to be open and honest with them and answer any questions they may have as clearly and thoroughly as possible.
It might feel awkward or embarrassing to discuss your financial position with your employer, but it shows that you’re actively seeking help with your debts.
Remember, your Trust Deed will also be visible on a public register which your employer is free to search if and when they wish but are unlikely to do so unless they have a valid reason or concern.
If you’re a self-employed contractor, you won’t have to worry about your employer finding out about your Trust Deed but may find it difficult to successfully apply for council contracts. This is because most local councils tend to perform extensive financial background checks.
Are there certain jobs that don’t allow you to have a Trust Deed?
Being in a Trust Deed can affect your chances of being able to keep your current job or secure a new job if it falls within a certain profession.
The best way to check whether your job falls under this category is to check your employment contract for a ‘restrictive covenant’ stating that you can’t be involved in any form of insolvency while you’re in your current position. Some roles even class being insolvent as a disciplinary offence and your job could be at risk if you don’t disclose your Trust Deed to your employer.
However, these jobs are usually limited to those where you have a responsibility for handling money or are a position of trust, such as a member of the police, a firefighter, or a solicitor.
If you have a profession where you think it might be an issue to enter into a Trust Deed, you should check your employment contract before going ahead with any type of arrangement. If you are unsure, a financial advisor should be able to help.
Could I lose my job if I have a Trust Deed?
It is highly unlikely that you would lose your job for entering into a Trust Deed as long as your arrangement doesn’t impact your ability to carry out your job as normal.
However, if you are in a profession where it is stated in your terms of employment that you absolutely can’t be insolvent, then it is vital you speak to someone so you know what your options are and what your next steps should be.
Debt affects people from all walks of life and police officers, firefighters, and financial professionals are no exception. Your employer will have more than likely dealt with an employee in a similar situation before and should be able to give you advice before simply releasing you from your responsibilities.
Are you considering a Trust Deed?
Can having a Trust Deed affect me being able to get a job?
Again, if you are applying to a profession with strict rules about insolvency, your employer may carry out a review of your finances. If they discover you’re in a Trust Deed, you may be deemed unsuitable for the role and advised to seek alternative employment elsewhere.
The police, in particular, are known to have a strict screening process for potential candidates and you’re unlikely to pass this stage if you’re in an active Trust Deed or still have evidence of a Trust Deed on your credit file.
For any other jobs where no financial vetting process takes place, however, there is no need to inform your prospective employer of your Trust Deed and it shouldn’t affect your ability to get the job.
Can I start a business while I’m in a Trust Deed?
There are no rules stating that you can’t start a business while you’re in a Trust Deed. In fact, many people who are self-employed enter Trust Deeds every year.
However, new businesses typically require financial help in the form of a business loan to get started and most banks will be wary of lending to someone who is insolvent and has a damaged credit score as a result.
Even after you’ve exited your arrangement, it can take some time for your credit score to improve. Because of this, most financial experts would advise waiting until your Trust Deed has been removed from your credit file and the public register before trying to start a business.
Furthermore, because most of your income will go towards your arrangement and essential living costs, it will likely take you a significant length of time to make enough money to be able to pay yourself and make a profit.
Here’s an example of how a Trust Deed can help
Let's say you owe...
Bank Loans
£11,152
Short Term Loans
£2,226
Phone Bills
£302
Credit Cards
£2,395
Store Cards
£648
Payday Loan
£1,408
Overdraft
£172
Total amount owed:
£18,303
Customer monthly repayments before and after entering a Trust Deed
Repayments reduced by 70%
Monthly payments are based on individual financial circumstances
What happens if I lose my job during my Trust Deed?
In the unfortunate event that you lose your job after entering a Trust Deed, it’s important not to panic.
First, you must inform your Trustee as soon as possible so they can take the necessary steps to prevent your arrangement from failing.
Unlike other debt solutions, like bankruptcy, Trust Deeds are designed to have a bit more flexibility. This means your Trustee should be able to ‘vary’ the terms of your arrangement to account for an unexpected change of circumstances, such as a job loss.
Because a job loss typically indicates a loss of earnings, your ability to make payments towards your Trust Deed will likely have reduced considerably and your Trustee may be able to apply for a payment break or reduction until you get back on your feet.
If you need debt advice or would like to discuss in more detail the effect that Trust Deeds or other Scottish debt solutions could have on your employment, don’t hesitate to give one of our expert advisors a call on 0800 043 1320.
