Pros And Cons To Choosing A Trust Deed Or A Debt Management Plan


For Scottish residents who are facing a mountain of debt, getting a trust deed or a debt management plan might be the right solution. Getting a trust deed is just one of the many options you can take to clear your debts. If you don’t want to face sequestration or bankruptcy, hiring firms like Creditfix – Trust Deed may be a viable solution to your financial struggles.

If you’re contemplating on getting one, here are 3 pros and cons you must know before choosing this option.

Advantages of choosing a trust deed

It’s affordable

Getting a trust deed means paying a single affordable rate every month that will cover all your creditor repayments. This rate is based entirely on what you can afford. Once you opt for a trust deed, you will be meeting with a debt adviser to go through your entire lifestyle to determine how much money you can set aside to pay your creditors. You will discuss your finances thoroughly. Your income, expenditure, including all household bills will be factored in. Then you’ll come up with a proposal based on your surplus income. Because of this scheme, it’s easier to manage your debt. Instead of making multiple payments to your creditors, you can focus on just one single affordable payment that will cover everything.

It gives you peace of mind

As long as you adhere to the trust deed agreement strictly and faithfully, you don’t have to worry about your creditors bugging you to pay them. And by law, all of your unsecured creditors are not allowed to add interest or any further charges to your debt. Opting for a protected trust deed also restricts your creditors from pressing any legal charges against you. And because your debt adviser will handle everything for you once your trust deed has been accepted by your creditors, all communications will be routed out from your mailbox and telephone lines. No more nerve wracking letters and phone calls. That’s a great deal of pressure taken away from you!

You will be debt free eventually

Most trust deed agreements last for four to five years maximum, depending on your circumstance. This means all your creditors will eventually write off your debt as long as you stay committed to paying the agreed amount every month. When your trust deed finishes, you will be discharged from all of your debts. What a breather!

Disadvantages of choosing a trust deed

Your credit rating will suffer

While opting for a trust deed may sound like a great way to clear off your debt, you should be aware of the impact it’s gonna make on your records. Your credit rating will definitely plunge once you opt in a trust deed as the action will be recorded on your credit file. And it will stay for six years from the date of approval. A low credit rating will affect your purchasing power, as you might be well aware of. But that’s to be expected since you are, after all, paying your debts and is naturally not in the position to borrow anymore than you can pay off.

Be careful of missed payments

You debt adviser will always remind you to be consistent and religious in following your trust deed. Missed payments are a no-no once you enter a trust deed. If you find your circumstance change for the worse, you may consult your debt adviser to adjust your monthly payments to a level you can afford. Note that only genuine change in circumstances are allowed, like a loss of job, and it will be investigated thoroughly. Missed payments are a window for your creditor to petition for your sequestration, something you don’t want to happen.

You will be listed in the Trust Deed register

By opting for a trust deed you should be aware that it will be publicly recorded in the Register of Insolvencies. It’s a public document and it’s visible to anyone including your employer, landlord, and creditors. Depending on the type of insolvency solution you acquired, some personal details it may contain are your name, address, gender, birthday, and the insolvency practitioner you contracted. It’s a shameful list to be part of, but something you have to accept once you go this route.