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If it’s unlikely you could repay all your debts, a trust deed allows you to repay what you can over a fixed period (normally 4 years). Your monthly payment is based on what you can genuinely afford to pay. If you own any assets, the Cleanslate team will let you know if these are likely to be affected. Once you have successfully completed your trust deed, the remaining balance on your debts is written off.
We will contact your creditors on your behalf to make them aware you have signed a trust deed. One of the many advantages of this solution is that, once approved, you will gain legal protection from creditor action.
If you would like to understand how a trust deed could work for you, our friendly advisers are here to help. When you contact us, we will take you through a simple budget to gain a full picture of your financial situation. We will then work with you to agree how much you can realistically afford to pay towards your debts and advise on the best route forward.
There are many advantages of a trust deed, a few of which are:
A trust deed is a legally binding agreement between you and a Trustee which allows the Trustee to deal with your creditors on your behalf. When you sign a trust deed with the assistance of Cleanslate, Lynne Flower will be appointed as your Trustee.
Your monthly income and expenditure will be worked out and you agree to pay your surplus income after living costs to your Trustee for a period of time, usually 4 years. If you own any assets of value or acquire any assets during this period these would also be realised. The Trustee collects the monthly contribution payment and the value of any assets and uses these to pay the costs of the process, including their fees. The Trustee divides the remaining money between your creditors. The amount your creditors receive is called a dividend. Your creditors are asked to agree or disagree to the proposed level of dividend at the beginning. If they agree the trust deed becomes protected and no legal action can be taken against you in relation to these debts.
Once you have made your payments and any assets have been realised, you will be discharged from your debt and any remaining debt is written off.
A trust deed could be an option for you if you live in Scotland, have £5,000 or more of unsecured debt and cannot repay it in full within 4 years. You cannot sign a trust deed if you have been made bankrupt and have not yet been discharged.
A trust deed covers all your unsecured debts (such as unsecured loans, credit cards, catalogues, rent arrears, council tax arrears and utilities arrears). There are a small number of exceptions, such as student loans, court fines and debts incurred as a result of fraud or a breach of trust. If you have any debts which cannot be included in a trust deed, our advisers will make you aware of this.
All trust deeds in Scotland are recorded in the Register of Insolvencies which is free to access online. In order for someone to become aware of your trust deed they would need to actively look your name up on this register. Your trust deed will remain on the Register of Insolvencies for one year after the Trustee has been discharged, then it will no longer be visible.
Your home may be affected in a trust deed, however this is only usually likely if you have a significant amount of equity. We find people often overestimate how much equity there is in their home, meaning they wrongfully assume a trust deed won’t be for them. To make sure that we can give you clear advice, if you own a property and are considering signing a Trust Deed, we will instruct a surveyor to provide us with a professional valuation of your property. We will ask you to confirm the redemption figure for your mortgage and any other borrowing secured against the property. This means that we can confirm the exact level of equity in the property. If there is equity, there are a number of options for addressing it, and we will discuss each of these with you. We will come to a clearly defined agreement as to how that equity will be dealt with in the trust deed and will confirm this to you in writing. If your home is likely to be impacted, we will explain this in full to you before you sign anything, putting you in control of your future.
In some circumstances, it may be possible to exclude your property from a trust deed, however this requires the consent of your creditors and we will discuss with you whether this may be an option for you in your specific circumstances.
It’s our experience that cars rarely need to be sold in a trust deed. There are numerous factors that could impact this (including how the car is financed, if it’s owned outright etc.). If you have reasonable need to use a vehicle and it’s worth less than £3,000 it will be unaffected regardless. Your general household possessions will not be affected by signing a trust deed. This includes TVs, mobile phones, laptops, furniture and white goods.
All unsecured loans must be included in a trust deed, including guarantor loans. It is important to note that if you enter this type of debt solution, your guarantor will assume full liability for the loan. You may wish to discuss the position with them before taking this type of action. If your guarantor is likely to face financial difficulty as a result, they can also contact Cleanslate for confidential advice.
Being in a protected trust deed will not affect your ability to have a bank account; however, you will not be able to use an overdraft. If your current account is with a bank which is also one of your creditors, it is advisable to open a new bank account with a bank to whom you owe no money.
Your credit file will be updated to show that you have signed a trust deed and this information will remain on your file for six years. This means that you may find it difficult to get credit for a period after your trust deed is finalised.
There is no upfront fee required before signing a trust deed. All initial advice provided by Cleanslate is free.
During the administration of a trust deed, the Trustee will be paid a fixed fee plus an additional fee based on the percentage of the total assets and contributions ingathered. The Trustee’s fee will be met from funds collected from your contribution payments and the realisation of any assets currently owned by you or acquired by you during your trust deed. The fees will vary depending upon the circumstances of the case. An estimate of these fees will be included in the estimated statement of affairs provided to you before you sign your trust deed.
You will receive an update annually, which, as well as providing an update on progress and dividend prospects for creditors, will set out the proposed fee and outlays intended to be drawn for that period. You and your creditors will have 14 days to raise an objection to the proposed fee and outlays if you wish.
To find out more about managing your finances and receive free debt advice, you can visit Money Helper.
