Scottish Trust Deeds And Divorce
In this article we will analyse some potential consequences of entering Scottish trust deeds while also dealing with a divorce or separation. We’ll also review what happens if a couple, having embarked on Scottish trust deeds together, subsequently decide to divorce or separate.
Debt problems can easily lead to relationship difficulties. Sadly therefore it’s common that parting couples also have financial problems to deal with in addition to the emotional stress of the situation. The situation can also be exacerbated by the high costs of disputed divorces in terms of legal costs. Following divorce or separation, which issues can become relevant in terms of using trust deeds in Scotland to deal with the debts?
Joint homeowners that are separating or divorcing may have a particular issue with Scottish trust deeds. This is especially the case where it is agreed that one party will remain in the jointly owned home and where this home has “equity”. If one party signs a Scottish trust deed their equity in the property “vests” in the trustee. In simple terms this means that the value of any equity in this asset will need to be paid into the protected trust deed to help repay the creditors.
Scottish trust deeds are flexible in the respect that generating the value of this equity does not necessarily require the sale of the property. However, it’s currently virtually impossible for a remortgage to release equity to be obtained while in Scottish trust deeds. Paying over the equity will therefore rely on extra contributions at the end of the usual trust deed term, or the support of friends and family. If a workable solution cannot be found the home might have to be sold, even if the resident at the home isn’t the person that entered the Scottish trust deed (though they will get to keep their share of the equity if the property is sold).
If you entered into Scottish trust deeds along with your partner or spouse, and you subsequently decide to separate or divorce, there may also be equity issues to deal with if you are homeowners. However you will potentially also face a different set of issues in terms of maintaining your Scottish trust deeds contributions following the split.
Divorce or separation typically involves an increase in costs. For example you may, as a couple, move from renting one home to renting a home each. You may find that you both have extra bills, such as utility bills or council tax. Without any extra income coming in, this will inevitably have an effect on your ability to maintain the agreed Scottish trust deeds contributions.
If you fear that this will be a problem (or it has already become a problem following a divorce or separation) the first thing to do is to set out your income and expenditure so that you can see how much you can afford to pay into the Scottish trust deeds. If the figure has reduced you’ll need to communicate with your trust deeds firm to get their thoughts on what happens next.
If the separation or divorce leaves you unable to pay anything into the Scottish trust deeds it might be that they are deemed to be no longer suitable for you and other options might need to be investigated. If your contributions to the Scottish trust deeds must reduce there might be an expectation that the trust deeds will be extended to compensate for the reduced payments. However, in matters like these, a trustee has some discretion so you may find that a suitable way forwards can be found that is acceptable for you and your creditors.
If you have a question in connection to Scottish trust deeds and divorce or separation, you may want to visit our Scottish trust deeds forum. A panel of debt experts (from a number of Scottish debt advice firms) is available to share their professional insight and knowledge with you, whatever your question or situation.
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