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Ten reasons why a trust deed may not be right for you

14th July 2011

When thinking about how to deal with debt, it’s normal for people to visit a number of websites, read a variety of articles and be conscious of the advertising that exists. The fact of the matter is that this material will generally have been written by those with a vested interest in a particular type of debt solution such as a trust deed. This can mean that much of the information available is skewed in favour of trust deed benefits, focusing less on some of the drawbacks.

A trust deed is undoubtedly the most appropriate debt solution for many people. In our 2010 trust deed survey of site visitors, a comparably small 8% thought that a trust deed had been an inappropriate selection choice. However, a trust deed isn’t the perfect solution for everyone. We hope the following list is useful for individuals looking to confirm how best to deal with their debts:

  1. The trust deed is not being used as a last resort. A trust deed is a serious insolvency measure. No matter how much certain websites extoll the virtues of a trust deed, it shouldn’t be seen as an easy way out of debt. If there are other viable ways to deal with your debts, for example re-budgeting or refinancing, they should be examined very closely. The same would apply if the debts can be paid back in full reasonably quickly via a debt arrangement scheme.

  2. You’re asked to commit to an unaffordable trust deed payment . Our trust deed forum often contains posts from visitors who find it hard to keep up with the agreed payments. Some companies will push you towards an unaffordable payment so your case meets creditor expectations (or their own internal guidelines) rather than using the appropriate advice process of ascertaining affordability and basing decisions on this information.

  3. A large lump-sum is likely to be forthcoming. In a trust deed you will need to hand over most lump sums you receive to help repay your debts. If there is a significant chance of a large inheritance, redundancy payment (or similar windfall) which would help to deal with your debts you may wish to factor this into your thoughts about the suitability of signing up a trust deed.

  4. You’ve taken trust deed advice from just one source. The suitability of a certain debt solution is not a clear or indisputable fact. Personal attitudes and circumstances need to be weighed up as well as the numbers themselves. Advice from more than one source can alert people to alternatives and reassure them when good advice is repeated.

  5. Your debt adviser isn’t a debt adviser. Don’t assume all debt advisers are qualified. They don’t have to be. Thousands around the UK have no qualifications or formal training at all. Ask any adviser you talk to what professional qualifications they have. If they do not have any, do you want to base your financial future on their trust deed advice?

  6. You haven’t reviewed the alternatives. As well as trust deeds you should look into alternatives including sequestration (bankruptcy), the debt arrangement scheme, debt management plans, refinancing and re-budgeting. Each has benefits and drawbacks; weigh them up as part of your decision-making.

  7. You’re being asked for an upfront fee or £500 to “protect the equity” in your home. Some trust deed intermediaries will charge you an upfront fee for their help in passing a case to an Insolvency Practitioner (the Trustee). It’s a complete and utter waste of your time and money and under no circumstances should you pay. Other companies will offer exactly the same without any charge. Avoid this charge and look elsewhere. Similarly, plenty of trust deed providers will “protect the equity” of a home that has no equity without levying a £500 fee.

  8. Selling tactics are being used against you. If you receive cold calls from a trust deed provider or read a website which only details trust deed benefits then you should run a mile. Take the time to find proper balanced trust deed advice rather than salespeople.

  9. The timing is wrong. Are you about to be vetted at work and does the process involve a credit check? Have you got a remortgage going through at the moment? Are you still banking with a bank who you owe money? Timing can be an important detail when considering trust deeds.

  10. You have major assets. Trust deeds involve signing over major assets as well as your surplus cash each month. No matter what you’re told by a salesperson, there is no avoiding this fact. Don’t go ahead until details of how your specific assets will be dealt with have been written up and provided to you.

In situations where they are appropriate, trust deeds can provide tremendous protection and relief. However, if poor advice is received, they can sometimes cause more harm than good. For trust deed information from a team of qualified debt advisers, our trust deed forum and advice line forms an invaluable resource.

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Wylie & Bisset Grant Thornton

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