Whether you are an existing customer or seeking debt advice for the first time, you may have some questions.
We hope that this handy Trust Deeds FAQs page will provide the answers you need, if not, please do not hesitate to Contact Harper McDermott.
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If you’re looking to find out more about Trust Deeds and how they work, we’ve compiled a list of the most common questions below.
However, let’s start with the most common question: What is a Trust Deed?
A Trust Deed is a debt solution in Scotland that consolidates unaffordable debt repayments into one single monthly payment and can write off up to 70% of unaffordable debts.
Trust Deeds are only available to Scottish residents and will typically last for forty-eight months, although they can take longer to complete if your circumstances change during this time or you have a substantial asset to protect.
A Trust Deed will generally help people with a debt level over £5,000, who are struggling to repay their debts but we regularly see customers with debts in excess of £40,000 use Trust Deeds too.
Trust Deeds can only be set up and managed by a licensed Insolvency Practitioner (IP), who is specifically qualified to perform this role and will act as a ‘Trustee’ for your arrangement.
Browse the FAQs below for common questions we get from customers looking to know how a Trust Deed works.
Once the Trust Deed has been signed it will be published on the ROI and within 7 days of registration, your creditors will be written to with details of your Income and Expenditure, Statement of Affairs and other statutory documents. The Trust Deed will then be registered as protected following expiry of the 5 week period from the date of the initial publication on the ROI, provided a third in value or a majority in number of creditors do not object to the Trust Deed proposal.
We would not contact your employer unless we required specific information from them, normally in circumstances where you have failed to comply with the terms of your Trust Deed and/or if you missed 2 consecutive payments then your Trustee may instruct your employer to deduct your payment directly from your salary. The only other way they can find out about your Trust Deed is from the ROI.
Your approved money adviser will be able to assist you in advising the DAS Administrator that you intend to apply for a DPP – this is referred to as an “intimation”. An intimation will protect you from enforcement action by creditors for an interim period of up to 6 weeks prior to the submission of your DPP application. You are only allowed to submit one such intimation in any 12-month period.
Whilst there is no legislation to restrict you from using credit, there will be no allowance given in your income and expenditure for any repayments, therefore, it is deemed inappropriate to incur further debt whilst in a Trust Deed.
Yes, rent arrears should be included but it is best to contact us for advice sooner rather than later to discuss the level of rent arrears and what agreement you have in place with the landlord, if any.
No, student loans are not discharged from a Trust Deed or Sequestration, they must be repaid.
Yes. You will be asked to show proof of your income either by providing bank statements, future income projections, your most recent set of accounts and/or information provided by your accountant. You will then be asked to make an affordable contribution based on your income and expenditure.
No, a Trust Deed does not involve court proceedings.
No. There is no restriction on your living arrangements. You can be a homeowner, live in your partner’s home, private/council/housing association tenant or live with your parents.
No. After signing a Trust Deed all payments to your unsecured creditors will stop. There are a few exceptions to this rule, for example, student loans and court fines.
No, this type of check contains only criminal history information. However, a prospective employer could also carry out a financial credit check which may make them aware of your financial problems.
All fees and costs are met from the funds received into the Trust Deed, there are no payments due by you over and above the agreed contribution from your income and/or assets. For further information on our fees please follow the link at the bottom of this page.
A Trust Deed normally lasts 4 years but depending on your personal circumstances it may be a longer period.
If you require tools to continue with your work, then you will be allowed to keep them.
You are allowed to keep all essential household items such as your furniture, electrical goods etc. It is unlikely your Trustee would sell your non-essential items unless they were of significant value.
It depends on the agreement. If your car is subject to a fixed sum loan agreement then you would stop making payment to the finance company because this is an unsecured loan agreement and the debt owed would be included in your Trust Deed. If it is subject to a Hire Purchase, Conditional Sale or PCP agreement, then it will be secured against the car and you would continue paying this if the Trustee and creditors agreed to the monthly expense.
Yes. We will write to you every 12 months for an update on your financial situation, however, if you have a change within this period you should inform us immediately.
If you do not owe your existing bank any money it is unlikely you would need to change banks. However, if you have an overdraft or other debt with your bank then you will need change banks and arrange for your salary/wages to be paid into a new account. You should also transfer your essential direct debits to the new account, making sure not to transfer direct debits to the unsecured creditors included in the Trust Deed.
The Common Financial Statement (CFS) is a budgeting tool, used widely across the UK as the most realistic and reasonable method of fixing an individual’s expenditure.
CFS figures are prepared by the Money Advice Trust following extensive research into the cost of living in the UK.
The CFS must be used in all statutory Scottish debt solutions such as a Trust Deed to calculate an individual’s expenditure.
If you are struggling to cope with rising day-to-day costs, you are not alone. Get in touch today to find out more about what your options may look like for repaying your unaffordable debt.
Your Trustee will note his interest in your policy to allow creditors to benefit in the event that the policy was to pay out during the period of the Trust Deed. You will be given an allowance to maintain the monthly premium for the policy in your Trust Deed income and expenditure.
If you have an endowment policy that is not assigned to your mortgage lender, then it may have to be surrendered for the benefit of your creditors. Alternatively, a third party could pay the equivalent of the policy’s surrender value and/or you could extend your payment period, therefore, allowing you to keep the policy. You will be given an allowance to maintain the monthly premium for the policy in your Trust Deed income and expenditure.
No. Unfortunately, mortgage arrears are not included in a Protected Trust Deed.
As the mortgage arrears are in relation to a secured debt, they can pursue you for any outstanding amount and may take action to repossess the property.
If you have not already done so, you should contact your mortgage provider to discuss repayment of the mortgage arrears and try and come to an agreement to repay them.
If you are not behind on your mortgage arrears then it is possible that by entering into a formal debt solution, your other outgoings will be reduced significantly enough to allow you to repay your mortgage as usual – this would certainly be a goal for many people struggling with their finances.
Yes, any arrears accrued prior to the date of your Trust Deed are included. Ongoing child maintenance must be paid and will be allowed in your income and expenditure.
You can retain a car up to the value of £3,000 and it will not be considered an asset in your Trust Deed. Even if the car has a value greater than £3,000, as long as you need your car for travel to work purposes then in most cases you will be able to keep your car. If, at the end of your Trust Deed, your car is valued at more than £3,000 then your payment period could be extended to take account of the car’s value and/or a third party could pay the amount in full or by instalments during the Trust Deed period.
Our initial advice is free and there is no cost to you if you decide against signing a Trust Deed after taking advice from one of our advisers. Should you sign a Trust Deed then we will charge a fee for our services. These fees are met from the funds received into the Trust Deed, you will not need to pay anything over and above your agreed income contribution. Your adviser will explain the fees in detail before you proceed and the paperwork you receive will also detail our fees. Additionally, your creditors will approve our fees when we present your Trust Deed proposal to them.
The Trust Deed will be listed under your name and the address you reside at, however it is your Trust Deed and should not affect your parent’s credit rating. If an issue ever arose, they can have a letter of disassociation placed on their credit report. This is explained in more detail on the credit reference agencies’ websites.
You will be required to inform Harper McDermott of any redundancy and severance payments. If you were unable to maintain the contribution, the Trust Deed would suspend payments for a reasonable period of time, until you managed to find alternative employment. If you fail to find new employment in that period of time then your Trustee would need to review the viability of the Trust Deed.
Your Trust Deed contribution would likely be suspended if you were unable to maintain payment due to ill health. You would need to contact Harper McDermott to discuss your situation, and they would review the viability of the Trust Deed.
If you do not pay your contribution when you are in a position to do so, we will contact you and attempt to have the payment restarted. If you do not co-operate and have missed two consecutive payments then we will ask you to have your employer make a deduction from your salary and pay it directly to your Trustee, this is done via a statutory form. If you do not agree to ask your employer to make the deduction then we will write directly to your employer and have the deduction made and the funds transferred to your trust account, this is also done via a statutory form. Therefore, it is very important that you continue to make your payment as agreed, if you are in a position to do so, and if you are not able to then you should contact us to discuss your situation as soon as possible. We will not write to your employer without informing you first and we will not write to your employer if you are not in a position to pay your contribution due to a change in circumstances that you have told us about and means the payment is unaffordable. You must be able to verify any change in circumstances with documentary evidence.
If your property is owned partly by a housing association or other organisation then any equity will be calculated taking account of the shared ownership agreement. If you have to pay rent for their share you would continue to do so as an essential expenditure.
Provided your Trust Deed becomes protected, all interest and charges will be frozen as at the date of signing of the Trust Deed.
No. Your name and address will be published on the Register of Insolvencies.
This would be very unlikely, unless there is significant equity in your property and/or you wanted to sell the property. Equity can normally be realised using the following methods:
In general, no. Your pension is not affected by your Protected Trust Deed.
However, you should discuss the existence of your pension and you will be advised accordingly concerning the availability of a tax free lump sum and the contributions you make to the pension.
Our experienced debt advisers will take you through your options on a call.
Yes, any arrears of self-assessment tax, National Insurance payments and VAT accrued prior to the date of your Trust Deed are included. Ongoing HMRC liabilities must be maintained.
By obtaining protected status, this means that none of your creditors can take any further action against you for the recovery of their debts. Upon protection, your creditors are legally bound by the terms of the Trust Deed.
When you have fulfilled all obligations in terms of your Trust Deed i.e. paid all contributions/complied with your Trustee, then you will be discharged from any debt incurred prior to signing the Trust Deed. Any remaining unsecured debt (other than those excluded) in your Trust Deed will be written off.
We will carry out the required statutory procedures to conclude your Trust Deed and you will then be formally discharged from your Trust Deed. A statutory form confirming your discharge will be sent to you.
Your adviser will advise you of your alternative options which are normally Sequestration or DAS (Debt Arrangement Scheme).
If you inherit monies or assets within 48 months of signing your Trust Deed they will form part of your estate and should be passed to your Trustee for the benefit of your creditors.
When your Trust Deed achieves protected status the arrestment will cease to have effect. Your adviser will advise you accordingly should an earnings arrestment be in place.
Assuming the HP payment is not excessive, it is likely the Trustee would allow you to continue with the payments once you sign a Trust Deed.
Depending on the Agreement the HP Creditor may require the return of the goods. You should always check the terms of your HP agreement(s) prior to entering into a Trust Deed.
Your creditors will be notified of the Trust Deed and should deal directly with Harper McDermott, if any of your creditors continue to contact you then you should advise them that you have signed a Trust Deed and offer them Harper McDermott’s contact details. If the creditor does not accept our details, please let us know and we will contact the creditors on your behalf.
A Trust Deed is an individual agreement and it should not affect your partner unless they are also in a Trust Deed or Sequestration, they jointly own any debts included in your Trust Deed and/or they jointly own property included in your Trust Deed. It is preferable to advise your partner and if possible have them attend the meeting(s) before you enter into a Trust Deed.
