Trust Deeds are a type of insolvency solution designed to help struggling Scottish borrowers who have a substantial amount of unsecured debt that they can no longer afford to repay.
Like any debt solution, a Trust Deed comes with some advantages and disadvantages, which are important to consider before deciding if it’s a suitable approach for your debt problems.
Keep reading for the pros and cons of Trust Deeds.
Trust Deeds – the pros
You’ll have one affordable monthly payment
Protected Trust Deeds are designed to lower your monthly unsecured debt repayments to an affordable level – as they’ll be calculated around all your other important living costs. This means you should be confident that you can make your required payments every month.
You’ll be protected from any further legal action
Once a Protected Trust Deed is agreed with your lenders, it becomes legally binding – which means you and your lenders have to stick to both sides of the agreement. As long as you keep up with your monthly payments, your lenders will agree not to take any further legal action against you.
A clear plan for repaying your debts
In most cases, Trust Deeds last for a period of three years. Once you’ve successfully made all your required payments, any outstanding debt included in your Trust Deed will be written off – so you can start on the road to financial recovery.
Trust Deeds – the cons
If you’re a homeowner, it’s likely you’ll have to release equity
If you own your own home, it’s likely that you’ll have to release some of the equity in your property as part of the agreement.
You could be made bankrupt if you don’t stick to the terms
A Protected Trust Deed requires serious commitment. Regular monthly payments must be made for the full term – in most cases, 3 years. Your lenders could decide to petition you for bankruptcy if you don’t honour your side of the agreement.
Your credit rating will be affected
A Trust Deed will be recorded on your credit file for a period of six years. During this period, it’s likely you’ll have difficulties getting further credit if you decide to apply for it, and you could also have problems applying for things such as a standard bank account.