What are the benefits of a Trust Deed?

17 June2011

If you're struggling with debts that you simply can't afford to repay but don't feel the bankruptcy route is right for you, one option is a Trust Deed. Available exclusively to Scottish residents, Trust Deeds enable the borrower to repay as much of their unsecured debts as possible over the next (normally) three years - and write off the rest on successful completion of the agreement.

A Trust Deed could offer some real help if you really can't afford to repay what you owe. But remember that as with any debt solution, there are a few things you should consider before you decide to go ahead.

Benefits of a Trust Deed

Manageable monthly payments

During a Trust Deed, your payments will be made to fit around your other essential living costs - money needed for things like bills and food - helping ensure that all those expenses remain affordable.

What's more, if your circumstances change, your payments may be able to as well (unless the change is too significant, in which case you might have to end the Trust Deed and find a more appropriate debt solution).

A clear path to repaying your debts

As long as everything goes to plan, you'll know that at the end of three years (or however long the Trust Deed runs for - it can vary), you will be free of your unmanageable unsecured debts.

If you have to take any 'payment breaks' during the arrangement (because something happens that means you can't afford the payments for a short time), it'll take longer, but you'd still make the same number of payments overall.

Stay in the home you're living in

Bankruptcy often results in homeowners losing their home, but a Trust Deed is different. It can help you keep your home and other assets as long as you keep up with your payments and pay off a reasonable portion of your debts.

However, if you fail to keep up, your Trust Deed could end up failing, which could leave you worse off financially (you'd be liable for the remaining debt as well as any costs already incurred).

But remember...

A Trust Deed is a serious commitment that will require you to pay as much as you can afford towards your debts until the agreement has come to a successful conclusion. It will also have a big impact on your credit rating - and you may have to release some of the equity in your home as part of the agreement.

As such, you should only consider entering into a Trust Deed if you're confident it's the right solution for you. Always discuss your options in depth with a debt adviser before you make any firm decisions about how to approach your debts.

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Tags: debt, unmanageable debt, trust deed, Scotland, Scottish, trust deed write off debt