A Trust Deed is the formal agreement between you and your lender that can help you avoid bankruptcy. If you and your lender agree to the arrangement, and you pay as much as you can for 4 years, the rest of the unsecured debt will be written off at the end of the agreement.
All the payments towards the unsecured debts (credit cards, personal loans, overdrafts, etc.) included in the Trust Deed will be replaced with just one affordable monthly payment during the period when the Trust Deed is valid.
The new payment will be based on the amount of money that you have left after covering the rest of your essential living costs. From this payment, an agreed upon amount will be passed on to each of your lenders.
After the Trust Deed comes to a successful end, any unsecured debt that has not been repaid will be permanently written off. If the Trust Deed fails for whatever reason, however, it may lead to Bankruptcy.
Do I Qualify for a Trust Deed?
You can only qualify for a Trust Deed if you are really unable to afford to repay your unsecured debts of at least $6,750 (£5,000) within a reasonable amount of time. You must, however, be in a financial position to make smaller payments each month. Find out more about qualification at Carrington Dean.
Even if you qualify for a Trust Deed, at least 50 percent of your lenders that own at least 1/3 of your total unsecured debt will still have to approve it. Once it is approved, it becomes a ‘Protected Trust Deed’, which means that you have legal protection against further action from your lenders.
You actually have no guarantee that your lenders will accept your Trust Deed proposal. In reality, however, they will most likely agree provided you are really unable to repay your debts in any other way.
Who Is the Insolvency Practitioner and What Do They Do?
The person responsible for overseeing your Trust Deed is the Insolvency Practitioner (IP). It is up to the IP to contact your lenders to explain why it’s the best option for all parties. After the Protected Trust Deed is agreed upon, the IP makes sure that everything keeps runs smoothly until when it comes to an end.
If you choose our company, you may actually never speak to your IP since our Relationship Managers will handle any queries or issues you may have, and pass on the necessary information to the IP. This allows us to make sure that everything is addressed as quickly as possible.
How Much Does It Cost to Enter a Trust Deed?
You will have to pay a fee to enter a Trust Deed and it follows a set structure based on your specific circumstances. You will receive full information after it is agreed that a Trust Deed is ideal for you.
Your fees will not affect how much you pay. You will still only ever pay as much as you can realistically afford each month. We just take our fee from each monthly payment that you make to cover our service.
Will a Trust Deed Affect My Credit Rating?
Just like most debt solutions, a Trust Deed will have an impact on your credit rating in the medium to long term. Future lenders will see the Trust Deed on your credit score for up to 6 years after it starts and your name will be featured on the Register of Insolvencies. It will be harder to obtain additional credit.
Part of the Trust Deed arrangement may involve releasing equity in your property. You may find it harder to remortgage or be forced to pay a higher interest rate, due to the impact of the Trust Deed on your credit rating. If you cannot release equity, you may be forced to make additional monthly payments, which will extend the term of the Trust Deed.