How Long Does A Trust Deed In Scotland Last?
Updated: 20th September 2016
If you live in Scotland and are considering starting a trust deed you’ll want to know how long it will last for. This question sounds like it should have a simple answer, but in reality there are many factors that might affect the period of any protected trust deed that you enter into.
In this article we’ll explain some of the factors involved. We’ll also share some information about things to watch out for that will help you to avoid Scottish trust deeds that run for an excessive period of time.
The standard minimum term of a trust deed is four years, sometimes expressed as being 48 payments or 48 months. Most people are able to enter trust deeds that run for this period of time.
You may be quoted a term in excess of four years. There may be good reasons for this to be the case. The creditors of a protected trust deed need to expect a certain percentage of what is owed to them to be repaid. This amount can only be paid after the fees and costs of the trust deed have been deducted from the contributions paid. If your monthly payment is relatively low, compared to your overall level of debt, a trust deed running for longer than four years might be required to gain creditor acceptance.
There can also be bad reasons for being quoted a trust deed term in excess of four years. Different providers of trust deeds may seek to charge different amounts in fees for example which might influence the proposed terms they’re offering. We therefore advise anyone quoted a trust deed lasting longer than four years to speak with another provider before making any commitment.
You may well find that an alternative firm can provide you with the same service over a shorter period of time. If you’re offered a trust deed that will run for longer than four years, it’s a wise investment of your time to seek out a second opinion.
Sometimes trust deeds have to be extended after they have been set-up. This might be the case if you were to fail to declare an increase in your income, the receipt of a lump sum or a new asset, or a significant reduction in your household expenditure. In these scenarios, under trust deed rules, the creditors might be entitled to a higher level of repayment. An extension might be required to recover such additional monies if they weren’t dealt with when they originally occurred. This can easily be avoided by promptly keeping your trustee up to date with any changes in your circumstances.
Another potential reason for an extension might be if you had to take a temporary break from your payments to the trust deed, or if it had to be temporarily reduced. This might occur if you had a significant one-off expense (such as a major car repair) or temporarily lost income (perhaps because of redundancy). You might be asked to make-up any missed payments by way of an extension to the originally agreed term.
Certain assets also have to be dealt with by trust deeds. For example, if you have significant equity in your home (or a car worth more than £3,000) you might have to make additional payments at the end of your trust deed so that your creditors can benefit from the value of these assets. Any agreement in respect of such assets should now be clarified and documented when you are first advised.
Finally, it’s very clear from our trust deed forum that certain Scottish insolvency practitioner firms do not prioritise the prompt discharge of their clients once their payments have been completed. This is another reason to pick a firm to help you very carefully and after some research.
Our simple checklist to exert control over how long your trust deed will last for is therefore as follows:
If you’re quoted a trust deed that will last for longer than four years, speak to another firm before committing.
Keep your trustee promptly up to date with any changes in your circumstances during the trust deed.
Get (and keep) a written confirmation and agreement about precisely how your assets will be dealt with before you sign the trust deed documentation.
Check out our forum for the names of firms which discharge their clients promptly, and a few others that seem to take an excessive period of time to do so. Looking for a second opinion on how long your trust deed should last? Our experts can help you with this.
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