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What is a trust deed?
A Trust Deed is a voluntary agreement between you, your creditors and your appointed Trustee (an Insolvency Practitioner) to repay part, or all, of what you owe to your creditors. It involves a degree of debt forgiveness, i.e your creditors writing off some of what you owe them.
What is the effect of signing a trust deed?
When you sign a Trust Deed you are signing essentially a declaration that you are apparently insolvent.
It can have an impact on certain jobs, so you should always check the terms of your contract of employment before you proceed. It can also have an impact on car Hire Purchase agreements and in some cases the HP Company may request the return of their vehicle.
How does my Trustee get paid?
Your Trustee will be paid out of the assets / contributions that you make to your estate and your Trustee will be paid in priority to your debts. The fee payable to your Trustee is based on a standard set fee together with a % of realisations. The % charged will range between 15-20% and the standard fee ranges from £1,000.00- £2,500.00.
What is a protected trust deed?
A protected trust deed is a special kind of trust deed that is binding on all your creditors. This means that, provided you comply with the terms of your protected trust deed, your creditors cannot take further action to recover the money you owe or make you bankrupt; you are ‘Protected’ from them.
Like bankruptcy, a protected trust deed can affect your credit rating and can also prevent you from doing some jobs.
How does my trust deed become a protected trust deed?
When you sign a trust deed your trustee will:
If more than half of your creditors in number or those accounting for one third or more of your debt do not agree to the terms of the trust deed, it will not be protected. Creditors who do not reply to your trustee within five weeks of the date of the public notification in the RoI are treated as if they had agreed.
If your trust deed fails to become protected because your creditors have objected to it, you can also apply for your own bankruptcy.
What will creditors expect?
As a general rule, creditors will expect you to repay as much as you can afford. You will pay what you can for 48 months. At the end of the 48 month period, your Trustee will discharge you from your debts, so long as you have complied with your Trustee and you have complied with the terms of your Trust Deed.
Where does the money come from?
The money needed to fund your trust deed usually comes from two sources – contributions from your income and the sale of things you own. You will normally be expected to pay a contribution out of your income. Your trustee will advise on how much you should pay after allowing for what you need to live on
In terms of the things you own, generally speaking assets of any significant value are sold for the benefit of your creditor. It does not include things such as your television, your car personal possessions (under a set value) etc.
Your assets – including your home
If you own your home, this is an asset; if there is any equity within the property. Your creditors will look to your Trustee to realise any equity or value that is tied up in your home. Your Trustee will therefore propose
how this will be dealt with as part of your Trust Deed process. If the value of yours assets exceed your liabilities, a Trust Deed is not the correct solution for you.
What happens if my circumstances change?
Your trustee will assess your contribution based on your circumstances when you sign your trust deed and it may be reassessed if your circumstances change. If your income goes up, your trustee is likely to ask you to pay a higher contribution from your disposable income, while if your income goes down, your trustee may agree to reduce or arrange a break in contributions.
If you acquire new assets within four years of signing your trust deed, such as an inheritance or lottery win, you must inform your trustee. Control of these assets also pass to your trustee and they may be used to pay your creditors.
What happens to my debts?
At the end of your trust deed, you will be discharged from all your trust deed debts providing your trustee considers you have met your obligations under the trust deed. If this is the case, your trustee will apply to AiB for your Discharge. Once your discharge has been granted, your creditors will not be able to pursue money owed to them prior to you signing the trust deed. Your discharge will be recorded in the Register of Insolvencies.
Some debts are not discharged at the end of your trust deed.
What happens if I don’t co-operate with my trustee?
A trust deed is an agreement you entered into voluntarily and if you fail to keep your side of the agreement there are implications for you.
If you do not co-operate with your trustee during the period of your trust deed, they are unlikely to discharge you from your debts when your trust deed comes to an end.
Should your trustee decide not to discharge you from your debts, they will inform you in writing of their decision and will give you their reasons for this. They must also inform you that you have the right to appeal against their decision to a sheriff in a Scottish court.
If you fail to comply with any of your obligations under a trust deed, your trustee can ask the court to declare you bankrupt.
They can also ask the court to make you bankrupt if they think this would be in the best interests of your
Do I get any of my assets back when I am discharged from my trust deed?
It is your trustee’s duty to sell your assets to realise funds with which to repay your creditors. Any assets or money left over at the end of your trust deed, after all fees, expenses and debts have been paid, together with interest, will be returned to you.
Can I be the director of a limited company?
Usually, the articles of a limited company stop a director from signing a trust deed (unless they resign). It is important you check this before signing a trust deed.
Can I hold public office?
Some public bodies have rules stopping anyone who has signed a trust deed from holding office. It is important you check this before signing a trust deed.
Will my credit record be affected?
Yes. It is likely that credit reference agencies will record details of your trust deed on your credit file.
Will my job be affected?
Some employers do not allow people who have signed a trust deed or are bankrupt to work for them, such as financial institutions. Before you sign a trust deed, you should check the terms of your contract carefully or speak to your employer.
Who can I contact for advice?
Anyone struggling with debt should seek advice as soon as possible. Seeking advice and dealing with your debt at an early stage may help you avoid some of the more serious consequences of being in debt, such as legal action by your creditors or bankruptcy.
There are a number of people who can give free, confidential and impartial money advice face-to-face in your local area. Some organisations may also give information and advice over the telephone. Whoever you ask for advice, make sure that the person dealing with you knows you live in Scotland.