Changing Banks Before Your Trust Deed

Most people entering into trust deeds in Scotland need to open a new bank account. In this article we’ll look into the reasons why this is the case, the risks of not changing a bank account promptly, and which types of accounts are suitable while a protected trust deed is running. There are two main reasons why it is important to change banks before pressing ahead with a trust deed:

Set-Off Rights

The first reason relates to the rights of “set-off” that your bank might have. If you owe money to your bank (for example because of an unpaid credit card or a bank loan) you might find money disappearing from any current account you have with the same bank once payday rolls around. This happens because the bank is using their rights of set-off to take payment for the loan or credit card that you are no longer paying. This isn’t just a “technical” threat to you and your cash, it happens frequently and could leave you in serious financial trouble, especially if you’re about to start a trust deed.

Forced Account Closure

The second reason is that not all bank accounts are available to people that are in a Scottish trust deed. For example, any bank account with credit facilities of any type attached to it is likely to be withdrawn if your bank finds details of your trust deed in the Edinburgh Gazette. If your bank account is suddenly frozen (or closed) you’ll find yourself without access to cash, unable to pay major household bills, and facing a period of uncertainty until you can get your new banking facilities set-up.

Before signing your Scottish trust deed you need to do some work on getting a new bank account open. The first thing to consider at this point is which convenient banks are not represented amongst your list of trust deed creditors. This can be complex due to the multiple brand names operated by some major banks. The FSA website contains a list of which “brands” belong to which banking groups if you are unsure who you technically owe money to.

You also need to find out which bank accounts are available to people in a trust deed. Most banks offer basic accounts that are available to people with damaged credit histories. The Trust-Deed.co.uk advice team often recommend the Co-op Bank Cashminder account, but there are many other alternatives that are also available. Good basic bank accounts will come with a debit card and access to internet or telephone banking.

Yet another thing to think about is whether you should pay for a “packaged” bank account or not. You may be offered a packaged bank account with a monthly fee by your trust deed firm. Examples include Thinkbanking and Secure Trust. Many high street banks will also offer your accounts which need to be paid for. We’d suggest considering whether that extra money could be put to better use on other things during your trust deed; your budget should be manageable but will not include much of a buffer. Any extra spare cash could be handy when you use a trust deed and there are plenty of alternative, free banking options available.

The Crux of the Matter
The key thing is to find a suitable bank and bank account well in advance of starting your protected trust deed. Don’t allow yourself to be rushed into signing a trust deed until everything is taken care of. Things to be done include:

  • Transferring all standing orders and direct debits to the new bank
  • Ensuring your employer alters your records to pay your wage into the new account
  • Making sure any benefits or other sources of income are directed to the new account

But is this all a bit of a hassle? Yes, it is going to take some work, but the feedback from the public in our trust deed forum is that if it isn’t done properly and promptly you may find yourself in a very difficult position later on.

Find out more about why you need to change bank accounts before entering a trust deed by speaking to other trust deed users and our trust deed experts in the Trust-Deed.co.uk forum today! On the rest of the website you’ll find heaps of helpful trust deed information and advice to make sure your trust deed runs as smoothly as possible. If you’d like to speak directly to an expert, just call our experienced, professionally-qualified team on 0800 043 7201.

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