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Debt Management Plan or Trust Deed article
Debt Management Plan or Trust Deed article
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If you find yourself in debt trouble and are not sure how to repay the money owed, a Debt Management Plan and a Trust Deed are two ways of regaining control of your financial situation. But which is the best solution for you?

In this guide we’ll compare Debt Management Plans and Trust Deeds, including how each solution works, the differences between the two, and how you can choose the best debt solution for your circumstances.

What are they?

Debt Management Plan (DMP)

A debt management plan (DMP) is a debt solution that will allow you to repay what you owe through a series of monthly payments agreed with your creditors. It’s an informal arrangement, unlike a Trust Deed or the Debt Arrangement Scheme (DAS).

While you will have to repay your debts in full, the payments and length of the arrangement are determined by your affordability, making a DMP a flexible way to settle your debts at a pace you feel comfortable with.

Trust Deed

A formal debt solution in Scotland, a Trust Deed allows you to write off a percentage of unsecured debt, freezes interest and changes and stops pressure from companies you owe money to. To be eligible you must owe at least £5,000.

A Trust Deed is a legally binding agreement and can only be set up by a licensed Insolvency Practitioner, a debt professional empowered by the Insolvency Practitioners Association (IPA).

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What is the difference between a Debt Management Plan and a Trust Deed?

Level of unsecured debts

There is no hard and fast limit on how much debt you can include in a Debt Management Plan. As an informal solution, you can include any amount of debt in the arrangement as long as your creditors agree, although the more debt you include, the longer the DMP will last.

When it comes to a Trust Deed, you must be carrying a significant amount of debt before you qualify. Your debt level has to be at least £5,000, and you should be in the position where you can pay towards that debt gradually.

Monthly payments

You will be expected to pay off your debt in full in a DMP. That means that while you may be able to negotiate reduced payments with your creditors, the size of your monthly payments will usually be determined by how much you owe overall, and how much you can afford to repay each month.

With a Trust Deed, you will combine all your debts into one monthly payment. The size of this payment is based on your disposable income, after essential costs like household bills are taken into consideration, and will be agreed on with the input of your IP as well as your creditors.

Repayment term

The length of your Debt Management Plan is dependent on your total debt and how long it will take you to pay off that debt entirely. So if you have £3,000 of debt, and can commit £60 per month towards it, your DMP will last approximately 50 months (or just over four years).

While the length of a Trust Deed can also vary, most people make a monthly contribution to their debts for a period of 48 months, after which you which you can expect a debt write off, where your creditors will forgive your remaining debts.

Impact on credit rating

Whether you choose a Debt Management Plan or a Trust Deed, unfortunately you won’t be able to avoid damage to your credit report.

Both solutions will stay on your credit file for a period of six years. This sends a signal to future lenders that you have had trouble repaying debt in the past, so you may find borrowing money or accessing further credit becomes more difficult.

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Which debt solution am I eligible for?

Debt Management Plan criteria

Whether you’re eligible for a Debt Management Plan is largely dependent on your situation. The people who find DMPs most helpful are typically those who owe a large sum of money they can’t pay right away, but may be able to settle over time by making payments on a monthly basis.

It’s worth noting that Debt Management Plans can only assist you in paying off your unsecured debts, whether you have racked up credit on a store card or owe money to a payday loan company. Any secured debts you carry outside the arrangement will remain your responsibility.

Trust Deed criteria

Trust Deeds are most useful for people who are in debt but have access to a regular income that can be put towards the money they owe. A Trust Deed may be a useful debt solution for you if you:

  • Live in Scotland
  • Have debts of £5,000 or more
  • Have access to a regular source of income and can keep up with monthly repayments

Similar to a DMP, you can only include unsecured debts in your Trust Deed, like credit cards, store cards, or personal loans. If you have debts secured against an asset (i.e. a mortgage on you home) you will be expected to continue these payments alongside your Trust Deed contribution.

When does a Trust Deed become a protected Trust Deed?

A protected Trust Deed is a Trust Deed that has become legally binding. That means any creditors (or people you owe money to) who are named in the agreement are then bound by the terms of that agreement.

When setting up your agreement, your IP will send your proposal to creditors. Your creditors then have a period of 5 weeks within which they can raise objections to the arrangement.

Your Trust Deed will only become protected if:

  • That 5-week period passes with no objections raised
  • Objections raised by creditors are settled
  • Fewer than 50% of the creditors object (or creditors representing 33% of the total debt value)

Once your Trust Deed becomes protected, you won’t have to pay a penny more towards your overall debt than the sum that is outlined in your arrangement, and your creditors won’t be able to chase you for repayment or seek to take enforcement action against you.

Can you lose your house on a Debt Management Plan?

For people with serious debt problems, one of the most urgent questions is whether the money they owe will put their home at risk. The good news is a Debt Management Plan should have no impact on your home whatsoever.

A DMP will help you with your unsecured debts, so secured debts like mortgages or rent payments won’t factor into the arrangement. As long as you keep up with payments to your mortgage or rented accommodation, you will be able to pay off your debt and protect your home at the same time.

Where can I get debt advice and help choosing a debt solution?

When you’re having debt problems and owe money to multiple creditors, researching debt solutions is a sensible course of action, but it can be hard to decide which is the right one for you.

Whether you would be better off with a Debt Management Plan or a Trust Deed depends on your individual circumstances, but we can help you decide.

Where can I get more advice on Debt Management Plan or Trust Deed and other debt solutions?

To discuss your options and get the support you need to deal with your debt today, contact us now on 0800 0431 431 or click the button to get started

Maxine McCreadie

Maxine is an experienced writer, specialising in personal insolvency. With a wealth of experience in the finance industry, she has written extensively on the subject of Individual Voluntary Arrangements, Protected Trust Deed’s, and various other debt solutions.

How we reviewed this article:


Our debt experts, and insolvency practitioners continually monitor the personal finance and debt industry, and we update our articles when new information becomes available.

Current Version

September 17 2021

Written by
Maxine McCreadie

Edited by
Maxine McCreadie