Trust Deeds
What is a Trust Deed?
A Trust Deed is a possible solution for individuals who can no longer cope with their debts. It is a legally binding agreement which can offer a more suitable alternative to sequestration (bankruptcy) for many people.
Advantages of a Trust Deed
- You no longer have to deal direct with your creditors - your Trustee will do this instead
- Simpler - you only need to arrange the agreed monthly or weekly standing order payment to the Trustee instead of trying to juggle payments to all of your creditors
- Personal - payments are set at a level you can afford, based on your remaining income after reasonable living costs are met
- Once a Trust Deed becomes protected, your creditors are legally bound by it and can no longer pursue you for repayment.
- A Trust Deed normally lasts for three years, after which time your debts are effectively written off. In certain circumstances, it may even be possible for a Trust Deed to be as short as only six months.
- You can sign a Trust Deed as soon as you wish. You do not need to wait for a creditor to take legal action against you which is normally required in a court bankruptcy. A known as sequestration. A Trust Deed does not involve court proceedings
- If your contract of employment does not allow you to be sequestrated you may still be able to sign a Trust Deed. Certain professions regard sequestion as a disciplinary offence for example the Fire Brigade, Police and the Prison Service.
Disadvantages of a Trust Deed
- If a creditor has already arrested your wages, this would continue to be effective. However, Councils who carry out earnings arrestments will generally lift them when the Trust Deed becomes protected
- Your credit rating may be adversely affected - although if you are struggling financially this may be imminent anyway, or may already be the case
- You cannot normally be a director of a limited company
How does it work?
- You would initially meet with one of our experienced staff to evaluate whether a Trust Deed is an appropriate option for you. No charge is made if no action is taken but it is essential that you give full information on your debts, assets and financial circumstances in order that you are given the best advice
- If you sign a Trust Deed, the Trustee's main duty s to realise your assets and collect contributions from your income in order to make a dividend payment to your creditors as the end. A Trust Deed is only a viable option if you have spare income or assets or both to finance it
- A notice will only be placed in the Edinburgh Gazette once. This publication is not sold as a normal newspaper in the shops, but has to be ordered from the stationary office. It is mainly read by financial institutions, such as banks.
- Within 7 days of being advertised the Trustee writes to all creditors. Within five weeks of the date of advertisement, the Trust Deed becomes "Protected" provided not more than one third in value or a majority in number of creditors object to it
- If a Trust Deed fails to become protected, sequestration becomes an alternative solution
What would it cost me to set up a Trust Deed?
- The fees for running the Trust Deed are met from your contributions/assets. You do not pay any extra charges.
Would I lose my house?
- Your share of the equity in your house would pass to the Trustee, however, in practice a home rarely has to be sold as alternative arrangements can usually be made
- This may be by way of a third party such as a family member or friend making a payment to the Trustee representing the equity in your property
- Alternatively, it may be possible, with the agreement of the Trustee, to negotiate a re-mortgage after signing a Trust Deed in order to realise any equity without having to sell the property
- If there is nil equity in the property a payment of £500 by a third party at the start of the Trust Deed would ensure that no further payment would have to be made should your property increase in value over the period
What about my car/other belongings?
- A motor vehicle can be retained provided it is required to go to and from work
- You are allowed to retain all essential household items