Hello mrs skint,

There are negatives associated with Trust Deeds which is why they should be treated as a last resort. They are however an effective way for many people to deal with overwhelming levels of debt.

A Trust Deed is a formal insolvency and will result in significant damage to your credit rating. This effect will typically last for six years until it's no longer on your credit file. At that point mortgage lenders could still ask whether you have been in a Trust Deed previously in a mortgage application even if it's no longer visible on your credit file.

During the Trust Deed you will be expected to live on a restricted budget. Care will be taken by good Trust Deed firms to ensure that, while the budget is restricted, it is reasonable and will cover your needs. Sustainability is important for all parties.

You will also have to provide details about your assets which may be taken into consideration in the Trust Deed. Good firms will clarify the position on your assets prior to you going ahead and signing the Trust Deed.

If you wanted to go ahead with a Trust Deed the next step will be to select a firm to handle this for you. Standards vary according to the feedback in this forum so a careful choice is essential.

I'm sure Kevin or Mark will have further thoughts about the very good question you have asked about the drawbacks of Trust Deeds. Being aware of the positives and negatives of any debt solution is extremely important.

thanks TDA for you input / info. I have spoken to Andrew briefly through email. We only have our house but like i said there is no equity, if anything we owe more than the house is worth at the moment. We do however have a car each which are currently on HP agreements, on strted in Jan 09 and one in Jul 09.
I have another Qs. We are kind ofusing credit cards the now as i am on mat leave to top up my wages to over bills etc. If we did decide to go for a TD Will recent activity on the cards go against us?

thanks

I think if the cards are being used just to "get by" it shouldn't cause too many problems but naturally creditors would be concerned if they saw significant purchases just before a Trust Deed was signed. If you are needing to use the cards to "get by" that's a pretty good sign that it's time to take advice on all of the options open to you as normally the debt total starts to spiral when this happens. Larger debt totals often lead to a more restricted choice of less attractive solutions.

If the HP agreements are reasonable in cost, fund cars that are reasonably necessary (for example for commuting), and will expire after the Trust Deed is completed they should not present any issues for you.

If your home has no equity (or is in negative equity) and you go ahead with a Trust Deed you'll want to ensure that you choose a Trust Deed firm that will put the position regarding your home to you in writing so you know exactly where you stand before you sign any Trust Deed.

I hope that's helpful......am sure Mark or Kevin will add their thoughts soon as well and of course the site support team remain available to you.

Hi mrs skint, thanks for posting.

I would echo everything that trust deed assistant has said. In terms of the recent use of cards, it shouldn't be a problem - however I would urge you to stop using the cards if possible and seek to get a sustainable solution in place as soon as possible.

That solution may well be a trust deed, though there may be other options available. As TDA said, the cars should not pose a problem as long as they are justifiably required and the payments not excessive.

Trust deeds do affect your credit rating, although realistically this will probably be affected whatever route you choose. The main negative I think is that you are entering into a formal insolvency procedure so are giving up some control - for example you are more at risk of being sequestrated if you do not fulfill your obligations under the trust deed. This is why you must be confident that the contribution level discussed is realistically affordable before signing up.

Thanks for your comments Kevin and TDA. My partner and i are still trying to figure out whats the best route to go down. We have about 45K in debt between us and can poss afford 250pm (rough estimate). What is the TD process and how long does it take before a decision is reached?

I noticed that Kevin is based in Edinburgh? I live in Paisley, would i have to use a practice in my area?

with regards to the cars? one is 150pm and the other 180pm and we use about 50-70quid each in petrol each month. The cars are used to get to work and are used during working hours for work purposes.

Thanks again for your advice

Hello mrs skint,

The process starts by gathering information such as:
Your income and expenditure.
Details of your debts.
Details of any assets that you own.

This information will allow an advisor to let you know the options open to you and also to explain the positive and negatives associated with each of them.

Should it turn out that a Trust Deed is an available and appropriate option for you the Trust Deed firm will draw up the documentation for you to review and sign if you are happy with it.

Provided that creditors are happy with the proposal and too many do not object to it around five weeks later it will become "protected" which means all creditors are bound by the arrangement and cannot take action directly to obtain payments from you.

In terms of our experts both Kevin and Mark's firms cover the whole of Scotland from various offices. Both firms have Glasgow offices.

From what you are saying it seems very unlikely that there would be a problem with the cars.

Hi There

I was just wondering what would happen if we went for a TD and it did not get protected? What would be the next step?

thanks

Hi mrs skint

The normal process is sequestration.

Perhaps the best way to look at the 2 options is that a Trust Deed is a proposal where creditors have the option to accept or reject. Sequestration is an option where creditors do not have that option and accept what is offered based on dividends from what is in the pot, so to speak.

Mark

Hi - I know its been a long time since i posted a reply, however ive been trying to sort my finances out. we sold one of our cars and tried to get by, but due to interest etc and extra outgoings like nursery we are still struggling and think that a td may be our only option. before going any further i wanted to check a couple of things, if a td gets refused by over 33% of our creditors does it then go straight to bankruptcy or do we have time to think of another option? Also i have recently been told that the way your 'contribution' is worked out is that 10pence for every pound you owe makes up your contribution to creditors, is this right? Thanks for your advice

Hi Mrsskint

sequestration normally follows an unprotected Trust Deed as creditors can still pursue you. The Trustee should be able to advise you only the liklihood of it becoming protected. My own firm has had no failed Trust Deeds in the last 12 months because we know the criteria to get it protected and work with the creditors. I'm sure many firms are the same.

The contribution is not based on a 10p in the ?ú formula. It is based on income less reasonable expenses. Some creditors work on a minimum dividend, however others don't.

I hope this helps a bit.

Mark

Hi mark, thanks again for info. My partner and me will likely be deciding in the next week or so if we are definetly going for a td, if we do this we will be using your firm as we have been impressed with info we have got and already have trust in your firm. we have a child who is 1 and are receiving some benefits for him, does this get taken into consideration as income for us? we think that taking everything into consideration we could contribute about ?ú250 a month towards our debt, however this is between the 2 of us and we are concerned that this may get refused as this may not be enough?

Thanks again

Hi Mrs skint

Always glad to help.

Best bet is to run through the income and expenditure, see who the creditors are and take it from there. The Trust Deed takes account of all income including benefits etc, but on the flip side it also takes account of child expenses etc, so will probably balance out.

Regards

Mark

Thanks Mark. We will be in touch over the next week or so then to see what the next step is and to arrange to meet with yourself or one of your colleagues. Thanks again

Sorry, just as i sent that i had a thought. Would it be ok to email you a list of all income / outgoings and debt for you to have a look at to see if its the best route for us to go down or is it best to wait til we meet with someone? thanks