Whilst there are many advantages of entering into a Protected Trust Deed there are, of course, certain disadvantages too. In this article we take a look at some of the considerations you should bear in mind and be clear on before deciding whether a Trust Deed is the right option for YOU.
- The first hurdle you need to overcome before you sign on the dotted line is to ensure that you’re actually eligible to enter into a Trust Deed. Whilst your advisor will give you more information on this you’ll need to have debts exceeding £5,000.00, have enough disposable income to make monthly repayments and ideally have personal possessions or property which could help raise funds (such as a car, property or investments etc.). If your advisor is satisfied that these conditions apply then you can move on to the other considerations detailed below.
- If you enter into a Protected Trust Deed then you’ll need to commit to monthly repayments for at least 4 years. This, then, is quite a big commitment and you’ll need to ensure you can maintain them going forward. To help you decide on an affordable amount your advisor will look closely at your income and outgoings to ensure that you don’t over commit yourself – however, equally so, your creditors will want to see a reasonable proposal and could simply reject it if they don’t feel it’s enough.
- If you decide to proceed with a Trust Deed then your credit rating will automatically be affected for a period of 6 years from the date on which you enter into it. Consequently, this means that you might struggle to get credit, even at the end of the arrangement.
- You may be required certain assets (such as your car or home) in order to repay your outstanding liability. There are, of course, certain exceptions to this – for example, if you need your car to get to work and thus generate an income. However, you should certainly discuss this with your advisor to make sure you’re absolutely clear on what your creditors can (and can’t) insist on.
- If you’re self-employed then you won’t usually be able to become a company director of a limited company unless the Deed states otherwise. If this situation might apply then again, it’s important to raise this with your advisor – especially if your main income is dependent on you having the company.
- If your financial situation changes during the arrangement term then it’s likely your creditors will claim it from you. Typical examples of these include successful compensation claims (such as PPI or delayed flights) and inheritance or reclaims against council tax arrears.
- Finally, if you fail to co-operate with your creditors then you should remain mindful that they can apply to make you bankrupt – and that could certainly have serious consequences.
Concluding points
Whilst your advisor will be able to give you more information about the potential disadvantages of a Protected Trust Deed that certainly doesn’t mean that they can’t be overcome either. To ensure you receive the very best advice you simply need to be open and honest about your financial situation and then take the appropriate advice to put yourself in a much better position going forward.
