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31.10.2018

Failed Trust Deeds

A Trust Deed is a legally binding Scottish debt solution which typically lasts for 4 years, although it can be longer depending on your circumstance. It allows you to reduce your monthly payments to one affordable amount based on your income and expenditure. The interest and fees on your debts are frozen and, after paying this reduced payment over your arrangement period, any debt remaining will be written off. Creditors can no longer legally contact you and can only communicate with the Trust Deed provider.

A Trust Deed when successful, offers you a financial fresh start in just 4 years and gives you immediate relief from creditor contact. It is important to note it is a serious financial commitment to reducing your debts and shouldn’t be taken lightly.

As a Trust Deed is a legal agreement, if your circumstances change and you are struggling to make your payments you can’t just stop paying or you will be in breach of your Trust Deed arrangement. It is important you communicate with your advisor – don’t just assume that everything is lost. Payment breaks are a possibility if you have been reliable with your payments thus far so don’t just assume your Trust Deed will instantly fail. A payment break can afford you time to sort out your finances and allow you to resume normal payment the following month. The missed month will be added onto the end of your Trust Deed.

What happens if my Trust Deed fails?

Occasionally Trust Deeds fail. This occurs when you stop paying into your arrangement and your Trustee doesn’t have faith in your ability to pay and will terminate your Trust Deed. If this happens you are:

  • No longer protected from your creditors. They can begin to contact you again once your Trust Deed fails.
  • Your Trustee may petition the court for you to be entered into sequestration (bankruptcy)
  • Any interest and fees on your debts will become unfrozen
  • Creditors may petition the court for your wages to be arrested or another court order.

Other solutions available 

If you Trust Deed does fail for any reason, it is a good idea to explore other debt solutions available and take the initiative to contact your creditors as soon as possible with an alternative suggestion as to how to pay your debts. This will stop them from taking further action against you.

Debt Mangement Plan

A Debt Management Plan may be an alternative for you. It is similar to a Trust Deed as you pay an affordable monthly payment based on your income and expenditure. However, unlike with a Trust Deed, your creditors are not obligated to freeze any interest on your debts as it is not a formal solution, although sometimes they will.

Also unlike a Trust Deed where any debt remaining after the 4 years is written off, you will pay every penny back with a DMP, including any interest that is incurred throughout the arrangement. This means the less you pay monthly, the longer it will take to pay off your debts. You could end up paying for over a decade compared to the 4 years with a Trust Deed.

Debt Arrangement Scheme

Another alternative debt solution available to you if your Trust Deed fails is a Debt Arrangement Scheme, which allows you to enter into a Debt Payment Programme. This solution is similar to DMP as you pay reduced payments until your debt is completely written off, however unlike a DMP when entering into a DAS, which is a formal solution, your interest and fees are frozen and your creditors shouldn’t be in contact with you. However, unlike a Trust Deed, you will pay back the full amount, which could take significantly longer than 4 years.

There are alternative options available to you if for whatever reason your Trust Deed fails. However, it is important to note that for most people a Trust Deed is often the quickest way to pay off your debts and gain a fresh financial start without having to sell any of your assets. It is important to remember it is always worth communication with your Trustee if any personal circumstances change in your life i.e. losing your job which means you won’t be able to make your Trust Deed payments, as they may be able to offer a solution which allows you to continue with your Trust Deed.

If you would like to discuss if a Trust Deed is right for you, give one of our friendly expert advisors a call for free on 0141 326 0380.