The mechanics of a trust deed are fairly basic in that once you realise that your debts are more than you can afford to finance then you are in serious trouble. For many people in Scotland this may well lead to a trust deed being created whereby trustees are given overall control of your finances, your spending and your assets and you are given a prearranged amount of money to live on each month. But who pays my bills under a trust deed?
Everyday living expenses
While every trust deed agreement is different and will depend upon the individual’s circumstances the chances are that you will effectively hand over control of your assets, your income and your expenditure to court-appointed trustees. For many people this will simply mean paying off an agreed percentage of your debts over a five-year period with any additional income used to fund your living expenses. So the vast majority of people will pay their own bills even under a trust deed.
Credit arrangements
If there is one thing central to any trust deed it is the fact that you will not be able to take on any credit arrangements while the trustees have control of your assets. To many of us this automatically brings to mind credit cards, loans and overdrafts and while these are central to trying to control your debts, it also takes into account a number of everyday agreements you may not have considered.
If you have for example a broadband agreement in place before your trust deed is in place then this will be allowed to run its natural course. However, if you look to arrange a broadband agreement for example after you have entered a trust deed this may not be applicable. While on the surface it does not look like a credit arrangement it is because you receive a service which you may not necessarily have paid for. The same can be said of mobile phone contracts, store cards and any other facilities which effectively give you credit prior to receiving a service or goods. Notify your trustees of any change in your financial situation
It is imperative that you notify your trust deed trustees of any change in your financial situation as soon as it happens. This may bring into play an increase in your income, further debts which you have not yet have notified the trustees of or indeed a reduction in your income. It is imperative that you let your trustees know your current situation on an ongoing basis and you should not wait until your annual meeting with them.
In simple terms you are being treated like a company with a balance sheet and if there are any significant changes to your situation then failure to notify your trustees is actually illegal. While many trustees will be flexible to ensure you are able to support yourself going forward, if you have a massive increase in your income then they may well need to increase your payments to creditors. There are potential fines and other penalties which can accrue if the trustees were to find out about a change in your circumstances without you notifying them direct.
Can life be normal under a trust deed?
The simple truth is that you can lead a relatively normal life under a trust deed although credit arrangements will certainly be off-limits. In many ways taking on a trust deed, whereby your creditors have agreed a specific re-payment plan, can take away some of the pressure which may have been building in the weeks and months ahead of your decision. The vast majority of people who have taken on trust deeds, and indeed maybe even gone on to bankruptcy, will have had sleepless nights, been frightened to answer the phone and effectively lived life under ever increasing pressure.
A trust deed gives you breathing space to pay off as much of your debt as possible prior to all of your remaining debt being written off at the end of your trust deed plan. The trustees, creditors and the courts realise that you will need money to live off, freedom to earn for your family and effectively they are more than willing to give you leeway so long as you pay what you can afford AND inform them of any changes.
Is a trust deed right for me?
There is no doubt that there is exceptional value for some people in taking the trust deed option although for others there may be other avenues to consider. If your debts are “controllable” then it may well be sensible to consolidate these into an affordable loan or even come to some kind of arrangement with individual creditors. If your debts are not “manageable” then you will need to seek professional financial advice to confirm the best road forward for you.
Some people may well be able to take on a trust deed, pay back what they can over the five-year period and then effectively start again. However, some people may well struggle with a trust deed and the mountain of debt and the mounting pressure can continue to rise. In this situation the potential to declare yourself bankrupt is something which may well have to be considered although again professional financial advice should be taken at every step of the way.
Looking to the future
The whole idea of a trust deed and indeed bankruptcy is to allow creditors and those owing money to effectively draw a line under the situation and move on. True, you will be expected to pay back an affordable percentage of your debts via a trust deed plan but this will only be something which you can afford and while you may have to do without the “luxuries” of life in the short term, this is but a small price to pay.
It is in the best interest of individuals drowning in a sea of debt, creditors and the courts to draw a line under your situation at some point and allow resources to be better used elsewhere. It does cost credit card companies, banks and other financial institutions significant amounts of money chasing outstanding debts and if these debts are effectively unrecoverable then this money and this time can be better spent elsewhere. It will also allow the pressure, both mental and physical in some cases, to be reduced for those in debt and effectively give them some hope for the future.
