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What Happens When I Finish My Trust Deed?
A Trust Deed is a legally binding Scottish debt solution. It allows you to reduce your monthly payments into one affordable amount, based on your income and expenditure. Any interest and fees on your debts are frozen, and after paying this reduced payment for a minimum of 4 years, the remaining unsecured debt is written off. Creditors can no longer legally contact you and can only communicate with your Trust Deed provider.
When you have met all the conditions of your Trust Deed successfully and it comes to an end, your Trustee will issue a ‘letter of discharge’. A copy of this letter will be sent to the Register of Insolvencies and Accountant in Bankruptcy (AiB) who will record your discharge.
Your Trust Deed will typically last 4 years, which over this time you will have made 48 monthly payments. This will count as ‘full and final settlement’ of the debts included in your Trust Deed. Any debts which weren’t repaid during the 4 years will be written off and any creditors who were included in your Trust Deed can’t ask you for any more payments.
A Trust Deed can sometimes last longer than 4 years or be shorter as you may find yourself in a position where you can pay off your debts sooner i.e. through equity in your home. Both of arrangements will need to be formally agreed before your Trust Deed becomes protected.
However, any debts which weren’t included in your Trust Deed or any secured debts you may have won’t be written off.
Trust Deed Discharge Process
As your Trust Deed comes to an end, you will enter what is known as the Trust Deed discharge process.
After all the conditions of your Trust Deed have been met i.e. releasing equity from your home, car or other assets and the term limit of 4 years has been reached, the discharge process will begin.
The discharge process can take approximately a month. During this time your debts should change to being ‘satisfied’. If it takes any longer than this you should contact your Trustee or Trust Deed provider. If any of your debts are not listed as ‘satisfied’ you may need to contact your creditors as they may have forgotten to update your credit file. It’s essential you make sure everything is up to date so you can begin to rebuild your credit.
It can take up to another 2 years before the Trust Deed is removed from your credit file. You may find it difficult to take out further credit, and you will most likely only be offered high interest rates. After 6 years – from the date your Trust Deed started – it will no longer appear on your credit file.
The Next Steps
Keep up with your budget
During your Trust Deed, you will have experienced living successfully with a budget, it’s important to try and keep this up even when you have completed your arrangement. You may have more disposable income but it important to save in case of any financial emergencies – you don’t want to find yourself falling back into serious debt.
Rebuilding your credit score
Once the Trust Deed has been removed from your credit file, it will be easier to rebuild your credit score. There are various things that can help you to improve your credit score:
- If you need to apply for a credit card, try to choose one which has the lowest interest rate
- If using your credit card only make small monthly purchases and pay the balance off in full each month
- Ensure you are signed up to the electoral role – if you aren’t this can have a negative impact on your credit score
- Check your credit score for any inaccuracies
- Avoid taking out joint credit with anyone who has poor credit
- Don’t apply for a lot of credit at the one time
Avoid the temptation to overspend
Now that you are cleared of any unsecured debt, it may be tempting to start spending and taking out more credit. However, try to avoid taking out credit unless it is necessary. only use a credit card to build your credit score – don’t be tempted to treat yourself and put extravagant purchases on the card. Try not to be persuaded by friends to go out and spend now that you are clear of your debt, it’s very easy to fall back into old habits. if you are heading out take only the cash you need – leave the cards at home.