The simple answer to the question ‘will a trust deed clear my debt?’ is that it can certainly clear your unsecured debt. Unsecured debt consists of items such as credit card debt, overdrafts and standard bank loans that are not normally secured against an asset. This is quite different from the likes of a mortgage or a secured loan which is normally secured against your home, which means that the lender can effectively sell your home to pay off the debt if you don’t abide by the payment terms.
A trust deed is an agreement between you and your creditors for you to make a contribution to the amount you owe them by paying an affordable monthly payment over a period of time which is usually five years. The total of these payments is classed as the amount you agree to repay and the balance of your debt is then written off. So in effect by you agreeing to a single monthly payment which is then distributed by your Trustee to your creditors it means that your creditors are effectively agreeing to the amount of your debt they will write off. This is an agreement that can very much suit all parties as the creditors receive something against what they are owed and the debtor can make an affordable payment and can then write off their unaffordable debt.
At the end of the trust deed the debtor is by all accounts debt free and can then make a fresh start in relation to their financial circumstances.
The key points of a trust deed
As part of the trust deed process it is important to ensure that the trust deed is protected which is the stage which offers legal protection to the debtor and binds the creditors to the agreement. This means that the creditors can no longer chase or harass the debtor and are unable to pursue any kind of legal action against the debtor. This is an important benefit to the debtor as you then know that as long as you make the payments agreed then you have the peace of mind that you will not incur any problems from lenders or the courts.
The trust deed process itself is relatively straightforward and can typically be set up in about five to six weeks. Another major benefit of setting up a trust deed is that your home and car can be protected in most cases, although it is likely that you will have to release equity you have in your property. Because there is no additional borrowing with a trust deed a credit search is not required and even if you already have CCJ’s you are still able to apply for a trust deed.
Get the facts
Like most debt solutions there are downsides associated with a trust deed such as the fact that your credit rating will be affected and you are restricted from taking out new credit whilst your trust deed is in operation. It is also important to note that you can be made bankrupt if you don’t abide by the terms of your trust deed. It is always advisable therefore to speak to a reputable debt advisor to get the information and advice to ensure you make the right choice.