In this article we explain the different stages associated with setting up and completing a trust deed in Scotland. The aim is to give you a better understanding of what to expect if you proceed with this debt solution.
Please do remember that different providers operate in slightly different ways. This guide is therefore general in nature.
The first stage of entering a Scottish trust deed is to get advice. The adviser will want to understand your financial and personal circumstances. This entails a fact-finding process which you’ll be closely involved in.
They’ll ask you to provide information about subjects that include:
Your general expenditure and bills.
Any significant assets that you own (like a home or a car).
Any expected changes to your circumstances in the future.
Once the adviser has gathered this information together they’ll be able to tell you which debt solutions you qualify for. The adviser should also inform you about the potential benefits and drawbacks associated with each of these options.
You should now be in a position to decide which option will be best for you.
Your adviser will now need to gather some evidence of your current financial circumstances. It’s a good idea to start collecting these documents together so that you’re ready in advance. They are likely to ask you to provide documents such as:
Recent payslips and benefit awards (or accounts if you’re self-employed).
Recent bank statements.
A mortgage redemption statement (contact your mortgage provider to get one issued).
Bills (electricity, gas, and council tax for example).
Creditor statements or letters.
Personal identification (to satisfy money laundering rules).
With this documentation in hand, your adviser will enter all of your details into the Common Financial Tool. This tool is used to evidence a professional analysis of your financial circumstances to your creditors (and also to relevant regulatory bodies).
The provider firm can also draw up the actual trust deed documentation. This is not a standard document; it’s personal to you. You’ll want to read it very carefully. At a minimum you should understand clearly:
How much you’ll be paying each month.
What will happen if your income or expenditure changes.
What will happen if you receive lump sums (or assets) before you’re discharged.
What will happen to any extra income (like overtime for example) you earn.
Whether you have any extra obligations connected to the assets that you own.
Please make 100% certain that this legally-enforceable document matches your understanding of what you’ve agreed to do. Once it’s signed there may be no way to change your mind later.
A copy of the signed document is sent off to be added to the Register of Insolvencies. Your trustee will also write to your known creditors. Your creditors now have five weeks to agree to your trust deed becoming protected, or to make their objections known to your trustee.
Any creditors that fail to respond to your proposals are deemed to have agreed with them. Provided that there is no significant opposition from your creditors, your trustee should be able to confirm that you now have a “protected trust deed” after five weeks has elapsed. Included creditors can no longer take legal action to recover debts from you.
Scottish trust deeds are typically set up to run for four years. This is a significant period of time, so it’s quite likely that your financial circumstances could change over that time.
Your provider will conduct periodic reviews with you. These might occur annually or twice per year. It’s likely that you’ll be asked to provide current documentation such as bank statements and payslips to your provider as part of your review.
If your financial circumstances have improved you might be asked to increase your monthly contributions. This could happen if you’ve received a promotion or a significant pay increase for example.
If your financial circumstances have deteriorated your monthly contribution might be reduced. A reduction could happen if your expenditure has increased (a higher mortgage or rent payment for example) or if your pay has gone down.
You don’t need to wait for your next review if something important changes. Contact your trustee promptly if any of the following happens:
You get a significant pay increase or decrease.
Your expenditure increases or reduces significantly.
You’re experiencing a financial emergency (major car repairs for example).
You’ve come into money (an inheritance or redundancy payment for example).
A delay in informing your trustee could cause major problems to build up for you – it’s therefore best to let your trustee know straight away if something big changes.
The agreement that you signed sets out your obligations. Once you’ve completed these obligations your trustee should be in a position to discharge you.
Discharge from Scottish trust deeds works in two stages. The most important stage, as far as you’re concerned, is your discharge. You’ll no longer be subject to the rules and restrictions associated with protected trust deeds in Scotland once this has occurred. You’ll also now be in a position to take steps to improve your future credit rating.
Your trustee will inform the Accountant in Bankruptcy that you have completed your obligations and that they have discharged you. This information will be added to the Register of Insolvencies. At this point your discharge becomes official. They should also send you a document known as a “Form 5” confirming that your discharge has occurred.
Your trustee also has to discharge themselves from your trust deed. This will occur after they have completed all of the administrative work that they need to do on your case. Depending upon their workload and priorities, this could be quite a long time after your own discharge. However, any such delay generally need not be of much consequence to you.
If you’d like to set up a trust deed please contact us. Our experienced qualified debt advisers can quickly get the process up and running for you.
If you have a question you might want to visit our forum. A panel of experts are available to provide information and advice in connection to all Scottish debt solutions.