The Life of Your Scottish Trust Deed
Congratulations on getting your Scottish Trust Deed through Debt Advisory Scotland. We appreciate your trust in us. You now have four or more years to make payments into your protected trust deed. A lot can happen during that time. This article will explain how certain events can impact your trust deed. Alternatively you can also browse through the trust deed Scotland website here to alleviate all your concerns.
Circumstances affecting your income
If you have a protected trust deed then it most likely was set up after 1 July 2012. This is an important date because after this date, trust deeds were set up under a protocol which requires you to report bonuses and commissions that are more than 10% of your normal take home pay. You will then have to pay 50% of the amount over the 10% threshold into the trust deed payment.
For example, if you normally receive £1,500 every two weeks and you receive a bonus or commission of £2,000 then you will have to pay a portion of the difference. In this case, the difference is £500. 10% of your normal £1,500 take-home pay is £150, which is subtracted from the difference of £500, making it £350. And then you have to only pay 50% of this amount, or £175, as an additional payment.
You do need to inform your IP (insolvency practitioner, who is usually an accountant or a member of the legal field such as an attorney, barrister or advocate) of this bonus or commission within two weeks or receiving it.
You need to inform your IP, at any time during the term of the trust deed, of any changes to your job, of an increase in debt or a debt that you had forgotten about when the protected trust deed was set up, your cash flow has improved (perhaps as a result of a decrease in spending or other expenses), or if you shift your residence. If there are other events that you are uncertain of their impact then you should still inform your IP. It cannot be emphasised enough that you ought to be always open and honest with your IP. This is good not only ethically but also legally as there could be severe consequences if you try to hide anything from your IP.
When you begin the trust deed process, the idea and reality of payments may be suddenly mysterious to you, especially as a third person (your insolvency practitioner) has entered the picture. Once the trust deed has been agreed to and becomes legally binding, you will indeed no longer need to pay your creditors directly. Instead, you will make one monthly payment to your IP who will then forward the appropriate amounts to each of your creditors. Your IP may retain a portion of the monthly payment as part of their fees or services.
If you have assets such as a vacation home, a second car, valuable artwork or other items that are included in the trust deed document then your IP will collect them, sell them and then forward the money to your creditors as part of the total payment.
Obviously, if you own only one home and have nowhere else to go to, or if you do have another property from which you receive valuable rental income then these ought not to be listed in the protected trust deed agreement. This is something that you need to discuss when you first meet with your IP.
Again, if you do have only one residence then that home will not be sold as no one benefits if you become homeless. However, if there is equity (the difference between the value of the home and the amount of the loan or mortgage) then you may have to refinance it in the final year of the trust deed agreement in order to raise a lump sum for the paying off of the remaining debts.
For example, if your home is worth £500k and you owe £350k on it then you may have to refinance the existing loan to be able to pay up to £150k (the amount of equity in the home). Of course, if only £10k is required then you will have a new loan of £360k (the existing £350k loan plus the new £10k loan).
It must be emphasised here that the trust deed is available through Debt Advisory Scotland to residents of Scotland. If you are a resident of other parts of the UK then please visit the IVA website here