People who take too much debt or whose circumstances have changed since taking out the debt now have access to Trust Deeds. These are designed to help someone who finds themselves unable to make the minimum monthly payments to their creditors. The trust deed is voluntary on both sides and does still mean that part of the outstanding money will have to be re paid.
The trust deed is set up by a trustee. They will work out together the whole agreement and will manage it. A trustee is an insolvency practitioner, and as such is regulated by law and also by their own regulatory body.
The trust deed will work out the minimum monthly payments that are to be made to the lender. It runs for a specified period, which is three years. After this term, the debt is finished with. It is only used if the debtor cannot even meet the minimum payments every month.
The setting up process involves handing over all financial details to the trustee. They will need to know how much is owed and to whom. They will also need to know details of other monthly expenses that the debtor has to pay to be able to live.
If someone owes money to more than one creditor, then it can all be set up in one single trust deed. Once the trustee has all the details, then they will contact all the creditors on behalf of the debtor. They will try to get them to agree to a new payment scheme.
A trust deed is advantageous as it lessens the stress of dealing with debt, as all correspondence comes through the trustee. It is less severe than bankruptcy as it is not published anywhere. If the debtor holds a position of public office, then it may be possible for them to retain this. If someone is a director of a company or business, then they may be able to continue trading.
Once the trust deed has been agreed to by all parties, then it is protected. This means that after the three year period is up the creditors have no choice but to write off any remaining debt. The debtor has a responsibility to make the monthly payments and to declare any unexpected windfalls which are over two hundred pounds. They must also not take on any more credit during this period.
It may affect your house as the creditors can claim any equity. There are ways around this with extra payments or buy back schemes. If your house is changed, then an alternative method of debt management should be sought. There are various organizations like debt help that can advise you fully on the workings of trust deeds. It is not a decision that should be taken lightly as it is not a free get out of jail card. It is considered as the last resort in debt management, and the only way that creditors will get some of their money back.