How the changes to the Scottish Trust Deed could be beneficial for you

Guest PostThe Scottish Government recently revealed major changes to the system for Scottish Trust Deeds, focussing on getting more value for money both for the people in debt, and for their creditors.

The current system had issues with trustees charging high fees for administration and hourly rates, often swallowing up a large proportion of the debtor’s contribution before it ever reached the creditors. In a number of cases, in fact more than 30 per cent, the debtor’s contributions were completely wiped out by fees and charges, meaning the creditors never received any payment at all.

Some of the changes are going to bring about some benefits for people entering into a Scottish Trust Deed. Here are the main changes that we see as being good news for our clients.

Benefits of the changes to Scottish Trust Deeds

• More time to pay: Under the new rules, a Trust Deed can be arranged over up to 48 months instead of the previous 36. This means, with a longer time to pay, your payments could be reduced and the total amount you pay may increase. This is a great benefit to those who were worried about how they would afford to make the Trust Deed payments.
  
• No social security benefits can be used: In a number of Trust Deed agreements in the past, debtor’s benefits have been taken into account as part of their income. This has often meant that part of the repayment to the Trust Deed has had to be made from their benefit income. The changes now mean your benefits will be safe, and it is only any money you earn over and above that amount that can be used to repay your Trust Deed agreement.
  
• More value from your Trustee: In the past, trustees have been allowed to charge hourly rates for the work they do in managing your Deed. On top of this they may have charged various administrative fees, fact finding costs and more. This often meant that only a small proportion of the money you pay into the Deed actually reached your creditors. With the changes in November, trustees will be required to work on a fixed fee which is agreed with creditors before the Trust Deed starts.
  
• Lower entry point: The minimum debt level has been reduced from £10,000 to £5,000, meaning a broader range of people can get help through a Protected Trust Deed than would previously have been eligible.
  
• More money for your creditors: People entering into a Trust Deed are in serious problems with debts. This does not mean they do not want to pay back the money they owe. With a longer payment period available, and more of the money they pay going to their creditors, this means people in debt are able to repay more of the money they borrowed before having the final amounts written off.

The changes to the Trust Deed agreements will not affect you if you already have a Trust Deed in place. For people taking out a new Trust Deed, any agreement signed on or after November 30^th 2013 will be subjected to these new policies.

If you are unsure of whether you will be affected by the changes to the Trust Deeds, or if you are worried about unmanageable levels of debt, call one of our professional advisors for a confidential chat about your circumstances.