What Is a Trust Deed? - Money Expert

Setting up atrust deed could be a solution if you have serious debt issues and are unsure of what to do next. Having a trust deed could help you save money by helping you avoid bankruptcy. However, they are only available in Scotland, so if you live in England, Wales or Northern Ireland, you may want to look into anIndividual Voluntary Arrangement, which work much in the same way as trust deeds.

What is a trust deed?

Trust deeds are an alternative to declaringbankruptcy for people with serious debt problems. It is a voluntary agreement with the people that you owe money to (your creditors) to repay part of what you owe them. A trust deed can involve transferring your valuable possessions to a trustee, so that their sale can be used to generate money to pay your creditors. You may also have to contribute some of your income.

A trust deed lasts for around 4 years. After this time, you won’t be obliged to pay the debts included in the trust deed - you will be ‘discharged’ from them. If your trust deed meets certain conditions, it can be recorded in the Register of Insolvencies as a ‘protected trust deed’ This stops your creditors taking further action against you to get you to pay up.

Who can apply for a trust deed?

You must owe a minimum of £5,000 to all your creditors before you can apply for atrust deed. If you would like to be referred to an insolvency practitioner by the National Debtline, you normally need the following:

What are the advantages of trust deeds?

Are there any disadvantages to trust deeds?

How do I appoint a ‘trustee’ and how do I pay them?

Your trustee will decide whether you have met your obligations and whether you will be discharged from your debts after the trust deed ends, A trustee must be a qualified insolvency practitioner. The trustee will charge you fees for setting up and administering your trust deed. The fees are normally around £4,000. The fees will be paid out of the monthly instalments you pay, or through the sale of your valuable assets. Your trustee can’t charge you anything before thetrust deed is set up.

The ‘Accountant in Bankruptcy’ (AiB) can check your trustee’s fees. They can make sure that the work you have been charged for was necessary and recorded properly. However, the AiB can’t change the hourly rate that your trustee charges you. If you are unhappy with your trustee, there are various steps you can take. The first thing you can do is raise your concerns with them personally, and it’s best to do this in writing. Then, if you aren’t happy with their response, then contact their professional body.

What debts cannot be included in a trust deed?

Atrust deed only covers unsecured debts, such as credit cards and personal loans. Therefore, your trust deed can’t include the following debts: