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Analysing your finances

The first step in getting a Trust Deed is to carry out a detailed and realistic analysis of your financial position at present. This will help you work out exactly how much you owe your creditors, how much money you have coming in each month and how much you spend on essential living expenses. This, in turn, helps to calculate your ‘disposable income’ – whatever is left over once all your basic living expenses and regular bills have been paid (mortgage/rent, food, travel costs/petrol, childcare, gas/electricity and so on).

Based on this analysis, you can determine how much you can afford to repay to your creditors each month. At this stage, you should also work through all your debts and add up the total amount outstanding. Include all the debts you have, including unsecured loans, credit cards, store cards and amounts owed to friends and family.

Proposal to your creditors

Based on your calculations, the Trustee will draft a proposal for your creditors. This sets out how much you will repay to them, and over what period. Once the proposal is complete, the Trustee will then put it to your creditors on your behalf. The creditors then vote on whether to accept it.

Protected Trust Deeds

If your Trust Deed is registered as Protected, interest is frozen on your debt and creditors cannot take legal action against you while the Trust Deed is in force. A protected deed can be granted if creditors representing more than two-thirds of your total debt agree to it.

If you do enter into a protected deed, your creditors have the right to the equity that you may have in your home. However, there are ways to protect your property.

Fulfilling the Trust Deed

If your Trust Deed is agreed, you begin making the monthly repayment to the Trustee as agreed. The Trustee will then make payments to your creditors on your behalf. You do not have to deal directly with your creditors. A Trust Deed is a legal agreement with your creditors, you are obliged to co-operate with the Trustee, pay the monthly amount agreed, not take on any further credit and let the Trustee know of any change in your financial circumstances.

Once the Trust Deed is complete

Once the period of the Trust Deed is complete, you are free from your debts – regardless of how much of the total has actually been paid off. Any outstanding debts are now written off, in a process termed ‘composition of debts’ and you are free to make a completely fresh start, debt-free.

Starting the process

To start the Trust Deed process or to simply get some impartial advice contact Debt Options, apply online or call us on 0800 234 3605.