Sometimes referred to as a PTD, find out more information here
A trust deed is a formal agreement between you and your creditors where you make reduced payments to your debts. A trust deed usually lasts for four years. Once it’s completed, your unsecured debts will normally be written off. Trust deeds are not available if you live in England, Wales or Northern Ireland. In these countries, an individual voluntary arrangement (IVA) is a similar solution, but it’s important to note that it has different benefits, risks and fees associated with it. A trust deed becomes a protected trust deed once your creditors have agreed to the proposal. At least half of your creditors need to accept the proposal for it to go ahead, or creditors representing at least two thirds of your total debt. If a creditor doesn’t respond, it’s assumed that they’ve accepted the offer. If you enter into a trust deed you’ll need to pay a fee to the IP managing it for you. The fees charged for trust deeds can vary, so it’s worth comparing the rates of a few companies. The fee will usually be included in your monthly payment and covers the cost of the administration and running the trust deed. However it’s important to note that some IPs may charge an upfront fee. There are strict qualifying criteria you must meet in order to apply for a PTD.
In order to qualify for a Protected Trust Deed (PTD) you’ll need to meet the following criteria:
- Over £5,000 unsecured debt.
- Over £100 disposable income.
COSTS
Fees: We do not charge you for the advice and support we provide before your PTD is set up. There are fees involved in running your PTD. The fees follow the industry standard for PTD and are set by your creditors. You must agree to the level of fees before your PTD is approved. Your Insolvency Practitioner will deduct these fees from your monthly payment, so you don’t have to pay any additional costs.
Credit: If you’re on a PTD, you can’t take out any credit of more than £500 without getting written approval from the Supervisor of your PTD first. Also, it may be extremely difficult to a find a lender who is willing to give you a new mortgage while you’re on a PTD.
Change of Payment: A payment can be reduced by 15% without going to another creditor meeting but it is at discretion of the IP and proof must be provided as to the reason.
ADVANTAGES
With the help of an Insolvency Practitioner (IP) you can make an affordable repayment to your creditors over 4 years. After this time any remaining debt is written off.
Once your trust deed is approved, your creditors won’t chase you for payment or add more interest and charges to your debts, and they can’t take any court action.
While you may have to sell some assets, you’re usually able to keep one vehicle as long as it’s worth less than £3,000 and is essential.
Although a protected trust deed is a formal debt solution, you don’t need to appear in court.
RISKS/DISADVANTAGES
An IP normally takes a charge for their service out of your monthly repayment, so it’s important to shop around and find the best one for you.
A trust deed may affect the terms of your employment; you should check your contract or speak to your HR department.
There’s the risk of bankruptcy if the trust deed fails.
Your credit rating will be affected for six years, starting from the date the arrangement is agreed.
Equity/Remortgaging: You may be asked to release equity in order to pay your debts. If there’s equity in your home then you’ll need to try to re-mortgage 6 months before your PTD ends. If you are unable to re-mortgage you can make a maximum of 12 extra payments or a 3rd party can offer a sum equivalent to the equity. Please be aware that remortgaging may result in a higher interest rate.
Failure: Should the PTD fail, creditors may back date interest on your debts or may request that the Trustee of your PTD petitions for your bankruptcy.
Change of Circumstances: Should your circumstances change during the term of your PTD, you may ask creditors to review the terms you originally agreed to. During your PTD you’ll receive an annual review and if your situation has improved, you may have to increase your payment. You will have to pay any surplus income you have, after your essential living costs are paid, into your trust deed for four years
You must inform the trustee if you’re personal or financial situation changes, for example if you inherit some money, or you lose your job
Redundancy: If a customer is made redundant the IP can decide to give the client a 6-12 month payment break, inside which the client must give an update as soon as they’re re-employed.