Is a trust deed right for me? Expert trust deed advice
18th April 2011
There are a number of options open to Scottish residents when dealing with unaffordable debt including a trust deed. This can be confusing for anyone weighing up the options open to them. In this article we look at some of the main options which are definitely worth looking into further.
A major consideration is the amount of unsecured debt you currently have. Unsecured debts exclude financial arrangements such as a mortgage or hire purchase on a vehicle. Many trust deed providers suggest that a figure of around £10,000 of unsecured debt may be the point at which a trust deed might be considered, though this varies a little from company to company.
With debts below £10,000, it may be better, depending upon your circumstances, to look at other alternatives to a trust deed such as a debt management plan or the debt arrangement scheme.
Another major factor is whether you own any significant assets. This regularly takes the form of equity in your home. If your share of the equity in your home is higher than your level of unsecured debts, the option of a trust deed is unlikely to be available. Sequestration (bankruptcy) would be likely to lead to the loss of your home.
Where significant assets are a factor, individuals will be best served if they look towards options such as a debt management plan, a debt arrangement scheme or even possibly selling the asset itself to fully repay creditors. If your credit rating is good you may also have the option of refinancing to affordably repay debt.
If you have equity in your home, but it is lower than your unsecured debts, you may still need to think carefully about whether protected trust deeds are the right option for you. Where equity exists, you will need to find a way to release it for the benefit of your creditors.
Integral to the options available is whether you are in a position to pay towards your debts on a monthly basis (and how much you can afford). If you are not currently in a position to pay towards your debts (perhaps as a result of unemployment) options such as a trust deed, a DMP or the DAS scheme are unlikely to be suitable. Bankruptcy may represent a suitable route to take, although some may choose to try to improve their circumstances first before taking any action.
If the amount you can afford to pay towards your debts each month is considerable you may well be advised against formal insolvency measures such as bankruptcy or trust deeds. Insolvency should always be treated as a last resort. If your debts can be fully repaid within a reasonable timescale you may well be advised to look into a debt arrangement scheme or debt management plan instead.
In circumstances where you can afford to make a reasonable monthly payment, but where DAS or a DMP would mean a very long repayment term, a protected trust deed may well be appropriate for you; especially if you have few realisable assets.
Other factors are also relevant. Certain professions may be affected by insolvency (including trust deeds). For example, those who work in financial services may find they have restrictions in their contracts against such measures. Professionals such as lawyers and accountants may find their professional body takes a dim view of such procedures. Those persons in disciplined professions such as the police, prison service or armed forces may need to closely follow set internal procedures, in advance, to ensure their employment is not unduly affected.
It must be remembered that this article is intended only to help guide people towards the options that might be most relevant to their circumstances. No decisions about any kind of debt resolution option should be taken without first consulting with a professionally qualified debt or trust deed adviser.
If you would like to speak to a dedicated trust deed expert you would be well advised to call our advice line on 0800 043 7201 where you will receive information, advice and support from those in the know.
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