Protected Trust Deeds

What is a Trust Deed?

A Trust Deed is a formal, legally binding arrangement between you and your Creditors which lasts for a period of 3 years. As it is a legal agreement it can only be carried out through a licensed Insolvency Practitioner. A Trust Deed is normally entered into when you are struggling to pay your Creditors and the level of your debt is significant.

The Insolvency Practitioner, also known as the Trustee, will work out a budget with you to decide what monthly payment you can afford to make. This one new payment will replace all other monthly repayments to existing Creditors. Any debts remaining at the end of the three year period, subject to exception, are effectively written off by your Creditors.

Why choose a Trust Deed?

A Trust Deed may be an ideal solution if you have unsecured debts of more than £8,000. The Insolvency Practitioner will deal directly with your Creditors and seek consent for the Trust Deed to become “Protected.” Once “Protected” unwanted contact from your Creditors should be severely reduced. If a Creditor continues to contact you, you should refer them to Easy Debt Solutions and your advisor.

An important feature of a Protected Trust Deed relates to your property. If you are a homeowner, the level of equity (difference between the value of your home and any loans, e.g. mortgage secured on it) is normally determined at the start of the Trust Deed. The equity has to be realised to pay your Creditors but this can normally be done without selling your home.

However, a Trust Deed is not the correct option for everyone and our advisors will go through all options to work out the best solution for your own particular circumstances.

Advantages

1. Payments are based on your budget and what you can afford.
2. Your advisor will deal with your Creditors, immediately removing any pressure from unwanted phone-calls and communication.
3. All administration is dealt with by the Insolvency Practitioner.
4. Once the Trust Deed has become “Protected” Creditors cannot take legal action to recover their debts. Creditors are then bound by the terms of the Trust Deed. This allows you to get back an element of financial control.
5. A Trust Deed is a private arrangement between you and your Creditors. Nobody else will be involved.
6. All costs are met from the contributions that you make into a bank account which is held in trust for your Creditors. The fees for the administration of these arrangements are agreed between the Insolvency Practitioner and the Creditors, and deducted from the monthly payment which you make and from the sale of your assets, if appropriate.
7. After the three years there may be an element of debt write-off, depending on the terms of the arrangement.

Disadvantages

1. If you are a homeowner and have equity, this must be released to pay your Creditors. There are, however, various ways this can be done without the need to sell your home for example by remortgage.
2. Creditors can vote against a Trust Deed becoming “Protected”. However only if the majority of Creditors object would the Trust Deed fail to become “Protected”. If this was to happen other debt solutions are available.
3. Certain professional bodies prevent members from signing a Trust Deed. Accordingly, individuals should check their contract of employment. You may not be able to remain a director of a limited company.
4. You may find it hard to get credit even once the Trust Deed has completed. Creditors, and credit rating agencies, will assess your risk level based on your financial history, although the credit rating may already be affected, and this will include the Trust Deed.