For those afflicted with insurmountable debts, trust deeds may seem enticing, offering affordable monthly repayments adjusted to your income. But it’s important to fully understand what they are, weigh out all available options and choose the plan that works best for you.
What Is a Trust Deed?
Trust deeds are legal agreements where an elected trustee receives the legal title of a property in lieu of a loan borrower. A good way to think of them is like a mortgage, where a declaration of trust cost is introduced.
For example, when a lender and borrower enter an agreement for purchasing property, the lender pledges to repay the loan, whilst the trustee holds the title of the property for the loan repayment period. This provides security to the lender and a feasible repayment plan to the borrower. More information on mortgage and trust deed differences can be found at
Pros
One advantage is legal protection: under a trust deed, creditors cannot take legal action against you, such as bankruptcy. Unlike bankruptcy, trust deeds will not prevent you from pursuing certain career interests, such as holding public office, nor will they carry the same social stigma.
Trust deeds are also suited to your own needs: you are charged an appropriate amount relative to your income, living expenses and timeliness. If you’re still actively earning, you can arrange monthly payments to be sent out when you’re most comfortable with them.
Cons
Trust deeds may appear enticing, but it’s important to know the drawbacks. For example, if you have secured debt (debt backed by collateral), trust deeds aren’t the best choice given how easily assets can be repossessed.
You also can’t obtain credit during the entirety of the trust deed, or up to six years from your signing of it. For business owners especially, signing a trust deed can be detrimental, as your business banking facility can be withdrawn, and you can struggle to set up accounts overseas.
It’s also important to understand how your trustee handles any new assets. If you receive money during your trust deed – from inheritances or cohabiting couples – this can be claimed by your trustee in order to pay off your debts.
There are countless variables to consider, and getting independent legal advice – such as the services listed at https://www.samconveyancing.co.uk/news/conveyancing/declaration-of-trust-definition-294 is essential to ensure the implications to your debts and assets are thoroughly assessed.
Having debts that need repaying can feel like a ticking clock, but it’s important that you consider all the pros, cons and alternatives before locking yourself into a contract. Trust deeds aren’t the only solution, and seeking professional advice will help you find the plan best suited to your needs.