A trust deed is a formal, legally binding document that transfers part or all of the
debtor’s assets (money and property) to a trustee to manage for the benefit of the creditors.
The trustee will probably ask the debtor to pay a sum over to them from their income on a regular
basis (similar to an informal debt management programme or DAS). This is a private arrangement
between a debtor and creditors. This is typically paid over a 48 Month period and the remainder of the
debt is written off.
The advantages of a trust deed for the debtor are
Your Trustee will deal with all creditor correspondence and queries.
All interest and charges on the debts are frozen on the date the Trust Deed is signed.
Once the Trust Deed has been given protected status, no further action can be taken against you by your creditors.
Will enable you to make a single payment each month during the term of the deed.
After paying the Trust Deed for the defined term, usually 48 months, any remaining debt is written off.
The Disadvantages of a trust deed for the debtor are
You will be required to release any equity in your property, which could include selling your home if you are unable to remortgage.
Any diligence (debt enforcement) that has already commenced to recover the debts, such as wages or bank account arrestment, will not be stopped by the Trust Deed.
Your credit rating will be affected by entering to a Trust Deed.
If you fail to maintain the payments according to the terms of the trust deed the result may be bankruptcy.
Details are published in the Edinburgh Gazette and added to the Register of Insolvencies.
You cannot acquire further credit over £250 until the Trust Deed has been discharged.
You cannot be a Director of a Limited Company.
What is a protected trust deed?
To become protected, a trust deed must meet certain requirements
The trustee must be a qualified insolvency practitioner
The trust deed must transfer all assets that would be taken over by the trustee as if the debtor had been sequestrated and it must be properly advertised in the Edinburgh Gazette and the trustee must notify known creditors.
It must be properly advertised in the Edinburgh Gazette and the trustee must notify all known creditors