There a number of advantages and disadvantages to a Trust Deed. However their relevance will very much depend on your individual circumstances. We consider the advantages first.

The Advantages of a Trust Deed

1. Single affordable payment
If you are struggling with multiple unsecured debts a Trust Deed will help as you pay only a single monthly payment based on the amount you can afford. This immediately puts you back in control of your finances and stops you from having to continually borrow more to make ends meet.

2. Debt written off
Normally your Trust Deed payments will last for 4 years (although in some circumstances this could be longer). At the end of this term any unsecured debts still outstanding are written off. This means that you know exactly when your Trust Deed will end and when you will be debt free.

3. Legal protection from creditors
Once an Trust Deed has started, your creditors are no longer allowed to take any action against you to collect their debts. They will stop writing to you and calling you. In addition you are legally protected from creditors trying to get wage arrestment against you or a charging against your property.

4. Interest and charges frozen
Your creditors are no longer allowed to add interest and charges to your accounts once your Trust Deed has started.

5. HMRC Tax and VAT debts can be included
As long as your Trust Deed proposal is reasonable HMRC will agree to it and any tax or personal VAT debts you have can be included. The Trust Deed is therefore ideal for dealing with debt problems if you run your own business.

The Disadvantages of a Trust Deed

It is important to understand that as well as benefits, starting a Trust Deed can also have some disadvantages. Before making a decision to start this debt management solution you need to understand these in the context of your circumstances.

1. Publicly listed
If you start a Trust Deed, although the agreement is not specifically publicised in a local newspaper, your name and address and will be listed in the Scottish Insolvency Register managed by the Accountant in Bankruptcy. This document is freely accessible via the internet. As such anyone can find out that you are in Trust Deed if they want to make a search.

2. Homeowners must release equity
If you are a homeowner, you will be obliged to release 100% of your share in any equity in your property to increase the amount you repay to your creditors. Generally speaking a valuation of the property will take place at the beginning of your Trust Deed but arrangements for the payment of this equity can be made at any point during the Trust Deed.

3. Relatively inflexible
Once you have started a Trust Deed you cannot simply decide to reduce your monthly payments. Significant changes can only be made with the agreement of your creditors. If your circumstances change any you are no longer able to make your payments, your Trust Deed may fail and you will still be liable for your debts or even forced into bankruptcy.

4. Negative effect on credit rating
If you start a Trust Deed, your credit rating will become significantly worse. For more information see How a Trust Deed affects your credit rating.

Additional information

Only a brief overview of the Trust Deed solution is given here. For more information, please see one of our dedicated websites:

http://scotland.beatmydebt.com/

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