Trust Deed FAQ
1. What is a Trust Deed?
2. How do I set up a Trust Deed?
3. What is the effect of a Trust Deed?
4. How much do I have to pay?
5. How long does a Trust Deed last for?
6. What happens at the end of a Trust Deed?
7. Why would a Trust Deed be good for me?
8. Why would my creditors accept a Trust Deed?
9. What if I default on my monthly contribution?
10. What will happen to my home?
11. How much does it cost?
12. Will I be able to get credit again?
A Trust Deed is a solution to debt and a real alternative to Bankruptcy. Basically it is an arrangement between you and your creditors, usually over three years. At the end of a Trust Deed the balance of any unpaid debts is written off.
Under legislation, once protected a Trust Deed is legally binding on all your unsecured creditors. The terms of your Trust Deed are tailored to your own personal circumstances.
If your creditors do not object to the Trust Deed it will become protected and therefore binding on all your unsecured creditors.
A Trust Deed can only be set up with the help of a Licensed Insolvency Practitioner (known as an “IP”). The IP has an important role to play in the proceedings. They are there to advise you and to put the Trust Deed to your creditors and have, at all times, to take your interests, and those of your creditors, into account.
Assuming that a Trust Deed is the best solution to your financial difficulties, there are a number of steps in the whole process.
Step 1.
Speak to one of our advisers - We'll assess your situation and assist you to prepare a list of your creditors, income and expenditure and agree an affordable monthly contribution.
Step 2.
One of our representatives will meet with you, normally in your home, to discuss and explain the process, and the proposals we prepare, to make sure you're happy with everything.
Step 3.
We'll notify all your creditors that you have been granted a Trust Deed and the details of the proposals.
Step 4.
The creditors then have 5 weeks in which to notify the trustee of any objection. Should the trustee not receive a sufficient number of objections then the Trust Deed will become protected - you'll be debt free in 36 months.
What is the effect of a Trust Deed?
Once the Trust Deed becomes protected all your unsecured creditors are bound by it.
This means that as long as you continue to pay your monthly contributions and co-operate with your trustee as regards your assets none of your unsecured creditors can commence any legal proceedings. Indeed all such creditors must cease all correspondence (including telephone calls) with you as regards your debts.
We will advise you fully about the amount that you should propose to pay into your Trust Deed. In principle, however, the payment will be based on your surplus income after allowing for day to day living expenses of you and your family. Your creditors will usually require that these payments are maintained for three years.
How long does a Trust Deed last for?
A Trust Deed will normally last for 3 years but may be extended by the trustee in certain circumstances.
What happens at the end of the Trust Deed?
The trustee, after deducting costs and his remuneration, will distribute the realised funds to your unsecured creditors in full and final settlement of everything you owe.
This means that at the end of the Trust Deed the creditors will have no further claim against you and, as far as you and the creditors are concerned, the balance of any unpaid debts is written off.
Why would a Trust Deed be good for me?
A Trust Deed is beneficial when creditors are applying too much pressure or when it would take you an unacceptably long time to repay your debts.
People who have benefited often say that one of the best things is that they know exactly when they will finish repaying their debts (usually three years). As with so many things, people can cope better if they know they can see light at the end of the tunnel. Other advantages include:
- Only one affordable monthly payment to your unsecured creditors.
- All unsecured creditors are bound by a protected Trust Deed so they are prevented from taking legal action and contact from them will stop
- Fixed period of repayment
- No court process or public notices
- No notification to your employer
- Bankruptcy can restrict certain types of employment while signing a Trust Deed has far fewer such restrictions
Why would my creditor accept a Trust Deed?
A Trust Deed will normally produce a better outcome for the creditors than would be available to them with an alternative, such as Bankruptcy (court driven insolvency proceedings). It also avoids the time and expense involved in having to take any legal action.
Furthermore, creditors benefit from knowing that the Trust Deed is being administered by a suitably qualified professional.
What if I default on my monthly contribution?
The period of the Trust Deed may be extended to allow any missed payments to be caught up. Alternatively, should this default be through no fault of yours (e.g. through a change in employment), the trustee will re-assess the level of your monthly contribution and amend it appropriately.
However, clients should note that where they are simply not co-operating with the trustee as regards paying the agreed monthly contribution that this will likely lead to the Trust Deed being terminated.
Your normal mortgage repayments should continue. A secured lender (e.g. the Bank which holds the mortgage) is not bound by the Trust Deed and retains its normal rights.
If you own your own home, you may have to make available the equity in your property.
Because the costs involved will vary, depending upon the complexities of individual Trust Deeds it is not possible to set them out here. You will, however, be made fully aware of the proposed fees in your case before you are committed to the process.
The trustee’s fees and the costs of administering your Trust Deed will be estimated by the trustee and advised to all creditors when they are notified of the Trust Deed. They will be deducted from the funds realised by the trustee and the monthly contributions you make over the lifetime of your case.
Will I be able to get credit again?
You probably feel that you won’t ever want credit again but this is still a very commonly asked question. The short answer is that it will depend on your circumstances at the time you apply for credit. It is important to note that during the term of your Trust Deed, in order to obtain credit in excess of £250 you must give the person from whom the credit is being obtained notice of the Trust Deed.
Experience shows that people are often able to obtain credit once their debt problem has been dealt with. Having successfully completed a trust deed will undoubtedly stand you in a better position than you would be in had your estate been sequestrated or you not dealt with the debt problem at all.
Subject to eligibility and acceptance, debt write-off applies on completion of a Trust Deed ,alternative solutions may be offered. Fees payable. Your ability to obtain credit will be affected. Calls may be recorded.
Debt Advisers Direct © 2008 All rights reserved. Debt Advisers Direct is a trading style of Freeman Jones Limited.
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