Hi Fs1985 and welcome to the forum. Well done on reaching out for advice and help. Often this can be the hardest step to take.

The positive in all of this is that you have solutions to help you deal with your debts. You will receive plenty of advice and support on the forum.

Can you tell us if you own any assets such as a car or a house?

You could consider 3 main options to deal with debts in the region of £20,000. These are a Debt Arrangement Scheme, Trust Deed or Sequestration.

All three of these options will have an impact on your credit rating. I wouldn't necessarily focus on trying to maintain this, I would try to focus on finding a plan which help you manage the debts and repay what you can afford. Have a look on the forum and you will find plenty of success stories of people who have completed a Trust Deed and went onto secure a mortgage, car finance and credit in the future. There is life after a Trust Deed. I really wouldn't pay too much attention to what you have been told by your friend.

What options you have available will come down to what you can afford to pay per month to a plan. To work this out you need to speak with a qualified expert who will work through a very thorough income and expenditure to see what you can afford to pay. Kevin or I the two experts on the forum would be happy to do this with you.

If for example you could afford to pay £200 per month to a plan then a DAS would take you approximately 8 years to complete. A Trust Deed or Sequestration would be 4 years. Obviously if you can afford to pay more per month then the timescale of a DAS would reduce. It's about finding a balance though in terms of what you can reasonably afford and still have a quality of life.

As I said, the positive thing if there is help, advice and support available for you.

Hi David thanks for getting back to me. I have a mortgage on my flat and I do have a car. My girlfriend works with a car company and arranges this for me so the cars are in her name not mine and the mortgage is in both our names. I think my girlfriend is concerned this will affect her credit rating?

Do these arrangements have differing effects on your finance rating, are some better than others? i think I do need to speak with someone about this as the money that comes out my bank just now I'm struggling to cope with.

Why do you ask about the house etc are they taken off you if you don't keep to arrangements made? I have no concerns about that anyway the gambling is 100% behind me and I just want to sort my finances out.

Is the mortgage the only account that you have together? Do you have a joint bank account or any joint loans etc?

In terms of your credit rating this will be affected for a period of 6 years from the start of a Trust Deed and Sequestration. This works on the basis that when you enter into the plan creditors will put an official default notice against you. This default will be remain on your file for 6 years then fall off. At the end of a Trust Deed or Sequestration you can start to rebuild your credit file and as you approach the 6 year point you will have made positive steps to rebuild this.

In terms of a Debt Arrangement Scheme this can have an impact on your credit rating for as long as the plan takes to complete. Even then it could potentially still be a number of years after that for it to repair itself.

Regardless of which plan you proceed with it will have a substantial impact on your credit file. The advice I give to all of my clients is to put your concerns about your credit rating to the side.

In a Trust Deed or Sequestration it takes into account assets which you own. If you own a property then we need to calculate the level of equity in the property. This would be done by carrying out a valuation and obtaining a settlement figure on your mortgage. If you have substantial equity then a Trust Deed or Sequestration would not be the best option. If your equity is minimal then you would need to pay this over for the benefit of your creditors and you can do this by extending your monthly payments at the end of 4 years for 1 or even 2 years. This doesn't mean you would lose your house but there are risks associated if you default on the Trust Deed/Sequestration. A good expert will explain all of this to you in person and go through it in detail so you understand it all.

A Debt Arrangement Scheme does not take into account any assets which you have. If your equity is substantial then this would be a more suitable plan as it would not place any risk to your property.

The best way forward would be for you to arrange to speak with an expert. They would explain everything to you, explore all of your options and then meet with you and even your partner to discuss things in person. The most important thing is to ensure that you receive everything in writing regarding how a particular plan will work, the timescale, payments and how it may impact on your property.

As the car is in your partners name then there is no risk to that.

Realistically you could be on a plan this time next week if you feel like you are really struggling at the moment.. You would feel like you have regained control of things and have a plan with a fixed payment per month an light at the end of the tunnel.

hi fs 1985
like you i ended up in debt and no way forward till i went to citazens advice and they suggested a trust deed like you was a bit wary but was the best decision i ever made you get no hassle from my creditors and as long as you keep up your payments everything will be fine i have just made my last payment to mine last week and it has lifted a big weight off my shoulders am just waiting to be discharged any time so good luck with whatever you decide

Hi fs1985

A trust deed can be very helpful, even if you own your property, but it's essential you get really clear, accurate advice about any implications for the property. Especially so, given that you own your property jointly with your partner and therefore it affects her too.

How much equity do you think you have in your property? (In other words, how much do you think it's worth, and how much would it cost to pay off your mortgage just now?)

Hi fs1985

Like you I was reluctant to go down the route of a Trust Deed,from that first phone call to David Tannock to signing the Trust Deed was the best way foward for me, there is light at the end of the tunnel. Good Luck.

Thank you all. Yes David we have a joint bank account together also which we both pay into each month to cover mortgage and bills etc. We also have our own bank accounts. The flat was bought over a 35 year mortgage and we have stayed here three and a half years I think. The only thing is it is in one of these first time type buyer schemes where the builder puts forward 20k that is paid back to them at the end of a ten year period... I believe this is usually done by re mortgaging. The flat was bought at £170k if I remember correctly.

I am apprehensive due to my partner being affected as the debt is all mine. As we are in a flat also we're not going to want to stay here forever. The idea of applying for a mortgage again even at the end of six years is worrying, it just feels like this would be a big black mark against my name. It's annoying, at the end of the day something needs done though because I can't afford all these bills

Hi Fs1985,

From what you describe there shouldn't be that much equity available in your property but I'd like to investigate this further with you. A Trust Deed could well be a suitable option.

Does the joint bank account you have with your partner have an overdraft with it? If so are you in the overdraft?

I can understand your reservations about entering into a plan which will impact your credit rating. Unfortunately with over £20,000 of debts and no way to make significant monthly payments to them you have very little option but to consider one of the plans. If you do nothing it will only prolong the problems and impact it will have on your credit rating.

In 6 years time if you want to move house it might be an idea to consider this purchase in your partners name.

Let's say for example you can afford £200 per month to a plan. On a Trust Deed you would pay £9,600 into it. If your equity is minimal then you may be required to extend your payments for 1 or 2 years depending on the level of it. Let's say your equity is zero for illustration purposes then you pay a total of £9,600.

On a Debt Arrangement Scheme you would pay £200 for 8.3 years approximately.

There is a financial difference of approx £10,400 and potentially 4 years.

If you are thinking about moving in the future that £10,400 could be the difference on a deposit.

These are all the scenarios and variables that a good knowledgable expert should discuss with you. That way you can balance up the pros and cons of each option and the impact this will have on your future. If you do that then you should choose the right option for you both.

Hi Fs1985

The only way that you can ensure that your credit rating is unblemished is by continuing to pay your contractual payments as you have been. So the first question you should ask yourself is whether it is really realistic to do so. If there is there a danger that you will just end up having to take on further credit in order to maintain the payments, therefore ending up with a bigger problem, then I don't think this would be a wise move.

Maybe you do feel that even though it won't be easy you can just about manage to pay enough to service these debts each month. The next question then is - is it worth it? As you say yourself, the interest charges will mean that your debts will only come down very slowly, so the likelihood would be that you will still have a significant amount outstanding when you come to the point that you would be wishing to remortgage.

When mortgage lenders decide whether to agree to lend or not, your credit history is only one of the factors they will look at. A very important factor is also affordability. So if you are still having to pay out a significant amount each month to service your debts then this would count against you in this regard, whereas it wouldn't be a problem if your debts had been cleared via a Trust Deed already.

So there are pros and cons to each approach when it comes to whether you can get a remortgage and it is difficult to say which route is likely to be better for you from this perspective. Given this, maybe your choice should be based on which debt solution is most effective for you in resolving the issue that you currently have rather than trying to second-guess the future.

It is important to know exactly what you are choosing between when deciding on your preferred route, which is why David is encouraging you to contact either of us experts. We would be able to clarify exactly what you would have to pay each month and therefore how long a Debt Payment Programme under the Debt Arrangement Scheme would be likely to take.

We would also get a valuation of your home prior to you signing up to anything, so that this side of things can be nailed down. whether or not there is equity in your home that has to be accounted for in your payments in a Trust Deed is obviously important and shouldn't be left as an afterthought. The equity would be calculated up front and it would be set out clearly to you what you would be promising to pay in order that your home is unaffected. That way you can make your decision in full possession of the facts and can sit down with your partner to discuss how you wish to proceed.

Thank you both, can I ask is there a chance that a person would not be given a trust deed for any reason? I have a stable job and the payments would not be an issue. I am still undecided and don't know whether to talk to my parents first, but as I've said I don't want to hassle them.

Hi fs1985,

A good knowledgeable expert advisor will be able to tell you the likelihood of your Trust Deed being accepted or not at the outset when giving you advice.

How it works is a proposal is effectively sent to your creditors for them to consider accepted or rejecting. We generally work to a set criteria on what they will and won't accept. As long as you are able to pay a suitable payment per month, your income and expenditure isn't excessive and the fees of the Trustee are within what creditors determine is acceptable then there should really be any issues with the proposal. Kevin and I have worked with Trust Deeds for over 10 years and know what the creditors like and don't like in terms of a proposal.

Speaking to your parents is an option but circumstances can change and this can then place a strain on a relationship or perhaps place them into financial difficulties. Let's say for example you approached them asking for help and they re-mortgaged their house for £20,000 to clear your debts on the basis that you pay them back every month. You have a stable job at the moment but things can and do change. You could face redundancy, I'll health or a change in circumstances which could mean you cannot afford to pay them back. This could then jeopardise their financial circumstances.

You have 3 suitable options available that would allow you to manage your debts that you would control and really wouldn't involve anyone else other than your partner regarding your property. Even then from what you have told us there should be no risk to the house.

You are asking a lot of important questions and really thinking things over which is good to see from an advisor point of view. As I said if you do that, take your time and speak about all your options then you should make the right choice.