What is a trust deed?

A trust deed is a legal agreement between you and your creditors to pay back as much as you can over a set period. This is usually four years. After this you are not liable for the debts in the trust deed.  

A trust deed may involve transferring valuable things that you own (your assets) to a trustee. The trustee then sells them to raise money to pay your creditors. A trust deed often involves you contributing from your income.  

Some trust deeds may be recorded in the Register of Insolvencies as a protected trust deed. This stops your creditors taking further action against you to get their money back if you stick to the terms of the trust deed. 

Who can apply for a trust deed?

You need to owe at least £5,000 before you can apply for a trust deed.  

If your income is made up of only benefits, you cannot set up a trust deed. 

Who can I appoint as a trustee and how much does it cost?

The trustee must be a qualified insolvency practitioner (IP).  

The trustee charges fees for setting up and administering your trust deed. The fees are usually about £4,000 or more. These fees are usually paid out of your monthly instalments or through the sale of any assets you have.  

Advantages of a trust deed

• If a creditor agrees to the trust deed, your debt is frozen. If you keep to the terms of the trust deed, no further interest is added.  
• Once the trust deed has been set up, creditors should direct most correspondence to the trustee. 
• You can still have a bank account.  
• You can continue to be employed in most cases.  
• You may still be able to hold public office. 
• Your monthly payments can be increased or decreased if your circumstances change. 
• You may be able to have a trust deed without putting your home at risk.  

Disadvantages of a trust deed

• Only creditors who agree to the terms of your trust deed are bound by it unless it becomes protected. 
• If you do not cooperate with the trustee, they can try to make you bankrupt. 
• You cannot continue to be the director of a limited company unless your trustee and the company agrees. 
• Some public bodies may have rules that prevent you from holding office with them. 
• It could be more difficult to take out further credit during and after the trust deed.  
• A trust deed cannot include certain debts.