"Can I enter a Trust Deed"?

The Protected Trust Deed is only available to people living in Scotland with serious debts. 

What is a Trust Deed?

A Trust Deed is a legally binding arrangement between someone in debt and their creditors. A licenced insolvency practitioner is required to administer the solution. The Trust Deed is legally binding which means, if accepted, both you and your creditors would have to adhere to the terms of the Trust Deed for the full period (usually 36 months). The Protected Trust Deed is an insolvency solution for people who cannot afford to pay their contractual obligations to their debt as they fall due.

The process to enter a Protected Trust Deed is as follows

1. Contact a debt advice charity to ensure a Protected Trust Deed is the right advice. 
2. If it is you would need a licenced Insolvency Practitoner to adminster your case (there are a number of insolvency practitioners in Scotland)
3. The insolvency practitioner would create a proposal and send it out to all of your creditors. The proposal would include how much you propose to repay and over what period of time
4. A notice is placed in the Edinburgh Gazette about your Trust Deed
5. After 5 weeks, if less than a 1/3 in value or a majority in number DON'T object to the Trust Deed it will have gained Protection.
6. The insolvency company will then register your Protected Trust Deed with the Accountant In Bankruptcy.

Each year your insolvency company will review your Protected Trust Deed to ensure the payments are still manageable. The Protected Trust Deed is flexible so your payments can increase as well as decline depending on your available income.

You cannot enter a joint Protected Trust Deed as the debt solution is individual. This means a husband and wife would need to enter individual Protected Trust Deed's. The insolvency company may decide to enter one Edinburgh Gazette advert as this would save money on the case.

General criteria to enter a Trust Deed?

• Must owe at least £10,000 of unsecured debt
• Must be able to repay at least 10% of the unsecured debt over 3 years (excluding the insolvency practitioner fees - ranging from £2,000 to £6,000).
• If your equity from an asset (house, car etc) plus 36 monthly payments is more than your total debt then a Protected Trust Deed would not be the best debt solution.
• You must have at least 2 different creditors. 

Positives of the Trust Deed?

There are positives and negatives to entering a Protected Trust Deed and you should always seek professional advice prior to entering any debt solution.  

• Benefit 1: You can make affordable repayments towards your debts instead of trying to rob Peter to pay Paul.
• Benefit 2: You will write off some of your debt (typically 50%).
• Benefit 3: You can be sure of when the Protected Trust Deed will end (usually 3 years but your insolvency practitioner would inform you of this).
• Benefit 4: A Protected Trust Deed is a formal agreement for both you and your creditors which must be adhered to.
• Benefit 5: The Insolvency company will manage all creditor correspondence on your behalf.
• Benefit 6: Once your Protected Trust Deed has been agreed with your creditors they cannot change their mind at a later date, giving your security and protection.

Negatives of the Trust Deed?

The negatives of the Trust Deed should be considered extremely cautiously before proceeding. These include;

• Negative 1: It's legally binding so you will have to continue to make payments to your Protected Trust Deed, even if you don't want to continue.
• Negative 2: If you decide to stop paying your Trust Deed your Insolvency Practitioner would have a legal obligation to proceed with Bankruptcy.
• Negative 3: You can only include unsecured debts in your Protected Trust Deed - any others, such as your mortgage cannot be concluded. If you fail to maintain payments to secured debts then the items can be repossessed.
• Negative 4: A default will be added to your credit file and will last for 6 years. 
• Negative 5: Your house / flat is typically secure, however any equity would need to be released to enter into the Trust Deed. 
• Negative 6: You cannot obtain further credit whilst in your Protected Trust Deed.

Trust Deed Case Study

Steven (29) and Dawn (31) from Dundee have two children and entered into a Protected Trust Deed. They didn't have a car and they lived in a housing association. Their debt was £15,000 each and they planned to pay £170 each.

Evan (43) from Glasgow entered a Protected Trust Deed with £42,000 debt and a disposable income of £350. Evan also had equity in his property of £7,000 which he had to release via remortgage. In 3 years Evan will be debt free and discharged from his Protected Trust Deed.

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Top Trust Deed Areas

• Glasgow
• Edinburgh
• Dundee
• Falkirk
• Inverkeithing
• Stirling
• Aberdeen
• Kelso

Equity Release: Debt Solution

A debt charity has warned that over 55's are increasingly turning to equity release schemes in a bid to repay their credit card, personal loans and other debts which are unsecured. The CCCS found the average debt to be just under £23,000.

As personal budgets are squeezed ever tighter the outcome for consumers is bleak. Rising costs of electricity, gas, fuel and as expected an interest rate rise, are likely create a devastating strain on UK consumers.

The equity release scheme is one option to gain access to the capital tied up in an asset, such as a house. This option enables the person in debt to use the cash now and repay it within their mortgage. One benefit of the equity release scheme

Problems with Equity Release

There are problems with equity release, especially for people nearing retirement, as they will have a larger mortgage to repay and fewer working years to be able to manage the repayments. In the end, it could mean downsizing and selling the property with the potential future outcome of renting.

Also, whilst the equity release service from the CCCS is free to use, it requires a mortgage lender willing to provide the capital. The unsteady market conditions means releasing equity is very difficult, especially for people with defaults or arrears.

Be aware, with equity release schemes you are changing one debt which is unsecured (credit card, store cards, personal loans etc) for other secured debt (on your mortgage). You are not clearing the debt, just including it within your mortgage.

Full Debt Advice

It's essential people get full and honest debt advice before they take action and decide to release equity from their house. Planning for the future is essential. For example, somebody with a debt of £22,000 and a disposable income each month of £300 could be debt free in just over 6 years (if interest and charges were frozen, oh, and if they don't use a fee-charging debt management company!!). The decision is ultimately the consumers, but they could choose a debt management plan or an equity release option to resolve their debt problems.

Pensioners Struggle to Survive & Face Bankruptcy!

A report released today explains that pensioners are £280 worse off over the fully year compared to last year. Rising cost of living, low interest rates and Government cuts mean pensioners are facing a tough time financially. Experts warn the situation is likely to get worse.

The average pensioner has savings of just under £20,000 however as interest rates remain low their assets are not producing what they would have expected to help them in their twilight years.

As the cost of living increases and Government subsidies become tighter, the elderly are having to rely more on their savings. This has a detrimental impact on the quality of their living.

The number of pensioners going bankrupt has increase three fold over the past 10 years - this means they can expect a life living on state benefits and could potentially lose their property.

The severity of the problem continues to grow, lets hope the Government step in soon to support those most in need of financial support.

A spokesman for UK Debt Helper said;

Pensioners deserve our support and care and reducing the benefits they receive in heating allowance shows a grave problem with our country. Austerity measures are required to resolve the countries growing debt problem but surely it hasn't come to this, and if it has, why?

50% of Individuals Worry about Debts

More than 50% of individuals are concerned about their debts according to leading trade body R3.

The latest results, from the insolvency trade body R3’s Personal Debt Snapshots, reveal a 7 per cent rise in debt concern compared to the same time a year ago, according to the quarterly tracker.

Frances Coulson, R3 President said: “Households that are already struggling may find traditional lenders unwilling to provide further credit and are therefore drawn to short-term credit solutions. Individuals turning to short-term loans and credit cards should be wary of the high interest rates that often accompany these products. Overall debt can quickly snowball out of control.”

Credit card debt worries have increased by 5 per cent on the last quarter, whilst payday and short term loan worries have risen by 2 per cent, hire purchase concerns by 3 per cent and store card worries by 1 per cent.

Despite this, fears over secured lending have fallen. Mortgage repayment concerns are down by 4 per cent and bank loan doubts have decreased by 2 per cent. 

Frances Coulson commented on the trend: “Concern about secured lending is also likely to have fallen due to the Bank of England continuing to keep interest rates at an historic low. Households have begun to feel comfortable that their mortgage repayments will remain as they are for the foreseeable future.”

13 million individuals are saving less than they used to and one in five consumers are putting off big financial decisions.

 “Early 2011 was a tough period as individuals struggle to keep control of their finances and felt uncertain about the future. It is encouraging to see people have started to bolster their savings and pay off their debts. But we must remember that financial distress is still higher than it was a year ago.

“Delays in taking big financial decisions are up considerably on last year, indicating that the public is still hesitant about what the coming months have in store,” Frances Coulson said.

“With around six million people employed in the public sector in the UK, significant redundancies could result in increased insolvency levels. More people have started saving and paying off their debts, so these reserves should serve them well if they do face a period of unemployment. Those struggling with debt should seek financial advice rather than dealing with the distress on their own,” she added.

Family and friends help with Debts?

In times of trouble many people rely on their friends and family for support. We'll ask our family and friends for a variety of support but people often state they can't talk to them about their financial problems.

Friends and family lend a supportive ear when times get tough and whilst some may be judgemental at first, they will undoubtedly help you find an appropriate charity to help.

Our Research

We've asked 157 people who were in debt and less than 16% told their friends and family about their financial problems. This can result in people feeling alone, becoming depressed and suffering from mental problems.

Why you should speak to your friends and family about your debt problems?

1. "A problem shared is a problem halved"
2. Your friend / family may have been in the same situation themselves
3. Your friend / family can provide emotional support
4. Your friend / family can support you to find a debt charity to help you
5. Your friend / famly could offer short term support, either financially or by communicating with your creditors?

Have you told your friends and family about a debt problem? Please share your experience with us.

Avoid Mobile Roaming Charges

Mobile Phone Debts

The mobile phone was once considered a revolutionary product, only for the rich and people within the business world. Today, it's a communication tool to stay in contact with other people but importantly we all have them! The problem with the mobile phone is it can get us all into debt.

The mobile phone typically charges us 12p for a text message however when we phone other mobiles the cost can be up to 40p per minute - an hour call would cost £24! The home phone / landline cost would be far less expensive. The cost of using a mobile phone can soon sky rocket if you're not careful.

Also, watch out for roaming charges - these have been know to run into the thousands of pounds of debt. Roaming charges are when your phone cannot connect to the internet from your usual provider. The back up roaming company will charge you roguhly £3 per megabyte you download but check the small print on this. Every web page you look at will automatically download images and content which will then charge you! Usually people try and use their internet on their phone overseas and this is how charges are incurred.

"A good tip is to check if there is available WiFi nearby as this won't incur roaming charges"

You can avoid roaming charges by checking your setting and switching the roaming off.

New EU Regulations

The European Union has started to implement new regulations which will take effect from 2012 which will limit the roam charges you could face. A company will not be able to charge you more than 81p per megabyte from 2012. By 2014 that should have been reduced to around 40p. It would found in a recent survey that the average phone bill for people returning from holiday was £149.

Tips to avoid high mobile phone debts

1. Only use your mobile when you are out of the house - if you have the house phone then use that instead (unless you are on a contract phone and have free minutes).
2. Monitor your free minutes carefully! Most people get into debt because they haven't checked how many available minutes they have and they've exceeded the level.
3. Turn off data roaming (it'll be in your hand book)
4. Budget for your phone and stick to it
5. WiFi is usually free - look for the WiFi sign!

Debt Management Plan UK Questions and Answers

Debt Management Plans: Questions And Answers

A debt management is an informal debt solution which should be considered carefully before entering the solution. It will have a negative impact on a persons credit file. The solution can enable you to repay your debt over a longer period of time that originally agreed. You may also be able to freeze interest and charges too!

Here are some commonly asked questions about debt management plans.

Q. Can legal action be taken against me if my creditors are receiving monthly payments?

Ans. Yes, because it is an informal arrangement both you and your creditors can cancel the agreement at any time


Q. How will a Debt Management Plan change my credit file?

Ans. Because your creditors will place a default on your credit file which will last for 6 years. It's not guaranteed they will do this but more than likely. This is because you are not repaying them what was originally agreed. Credit reference agencies (Experian, Equifax and Call Credit) will record this default.


Q. Is a Debt Management Plan a loan?

Ans. No, you do not borrow more money in a debt management plan - you use the available disposable income to offer pro-rata payments towards each creditor.

Q. How long does a Debt Management Plan last?

Ans. There is no set time for a Debt Management Plan to last. You must repay all of the debt you owe. If your debt management plan will last longer than 10 years then another debt solution may be more suitable.


Q. Will interest and charges be frozen?


Ans. There is no guarantee interest and charges will be frozen but a debt management company will ask for this.

Q. Will they take my house in a Debt Management Plan?

Ans. No, they will not ask you to offer your house in a Debt Management Plan. You must keep up secured loan repayment though to ensure you maintain your mortgage and retain the property.


Q. I have a CCJ, can I enter a Debt Management Plan?

Ans. Yes, there are no problems entering a Debt Management Plan with a CCJ


Q. Can secured loan debts be included?

Ans. No, you must always maintain your secured loan payments. If you are in arrears with your mortgage this cannot be included.

Q. How much do companies charge to set up a Debt Management Plan?

Ans. For profit Debt Management Companies charge the first 2-3 months payments (meaning your account will go into further arrears) and then a monthly management payment of between 12% and 50% of your payments.

A charity will not charge you a set up or monthly management fee. A debt management charity will receive 10% of whatever they collect and return to the creditors out of the end pot of money.

Q. How can you tell if your creditors are being paid?

Ans. A Debt Management company should send you quarterly statements to update you on the progress being made and the money which has been repaid.

Q. Is there a minimum amount I need to pay into a Debt Management Plan?

Ans. The more you repay each month the quicker you will be debt free. The minimum amount a Debt Management company can accept is £100 per month. If you cannot afford this amount then another debt solution may be more suitable.


Q. How will the payments be made?

Ans. You will pay one company (the Debt Management company) your monthly payment and they will distribute this amongst your creditors.


Q. My creditors are still contacting me even though i'm in a Debt Management Plan, what can I do?

Ans. You should speak to your Debt Management company and ask then to act on your behalf and deal with any problems.


Q. What are the benefits of a Debt Management Plan?

Ans. Potentially you can benefit from

• One monthly fee to one company
• Reduced interest and charges
• You don't have to liaise with creditors
• You will pay back all of your debt

Q. What are the disadvantages of a Debt Management Plan?

Ans. The disadvantages are

• It's informal so the plan can start and stop at any minute if the creditors change their mind
• Your Debt Management plan could last for a long time
• There is no guarantee interest and charges will be frozen
• It will have a negative impact on your credit file

Q. Who can enter a Debt Management Plan?

Ans. Anyone can enter a Debt Management Plan as long as they have a disposable income and unsecured debt.


Q. How much debt should I have to enter a Debt Management Plan?

Ans. You should not enter a Debt Management Plan if you have less than £5,000 worth of debt.

Q. How many creditors do I need?

Ans. At least 2 or 3 (depends on the company). A Debt Management company will not negotiate with one company for you.


Q. Can Debt Management monthly payments change?

Ans. Yes, the Debt Management company will conduct a 6- monthly review of your income and expenditure. If you have more money which you can repay towards your creditors then you will be asked to make this. If your income drops then your Debt Management plan can continue (as long as you can afford at least £100 per month) with a lower amount.

Q. Are my creditors going to accept my proposal?

Ans. There is never any guarantee your creditors will accept your proposal.


Q. If a creditor refused my proposal what would happen?

Ans. If a creditor refused your debt proposal then the Debt Management plan could continue although you would have to negotiate yourself with the other creditor.

Q. Why would a creditor accept a Debt Management Plan proposal?

Ans. A creditor is likely to accept a Debt Management Plan because it's an agreement for them to get back all of the money they lent you. This means that despite it taking longer than agreed, the creditor will not be out of pocket.

Q. Can I take out more debt?

Ans. Technically you can take out more credit. Most Debt Management companies will remove you from the Debt Management plan if they understand you to be using further credit to supplement your lifestyle.


Q. Can you get a joint Debt Management plan?

Ans. Yes, you can have partners (two people) entering a Debt Management Plan together.

Q. Can you change Debt Management company if you are already in a Debt Management Plan?

Ans. Yes. It's an informal arrangement so you can change your Debt Management company at any time.


Q. Who tells the creditors about the Debt Management Plan?

Ans. The Debt Management company should tell the creditors about the Debt Management Plan.


Q. Who will know about my Debt Management Plan?

Ans. The only people who know about a Debt Management Plan are you, the Debt Management company, your creditors and anybody else you tell. The Debt Management Plan is not registered publicly.

Q. Do I have to tell my wife / husband / partner about my Debt Management Plan?

Ans. No, not if you don't want to.

Q. How much will each of my creditors receive each month?

Ans. Payments made to your creditors are made on a pro-rata basis. This means the creditor owed most will receive the largest amount each month. For instance, if you can afford £150 per month then this will be split accordingly.


                     Total debt    Percentage of debt      Monthly repayment   
 





Bank              £4,000               66%                         £99

Store card     £1,000                17%                        £25.5

Credit card    £1,000                17%                        £25.5