Failed Trust Deeds
A Trust Deed is a serious financial commitment to reduce your debts and should be taken appropriately seriously. When successful, it can give you immediate relief from contact from creditors, and in just four years offers you a financial fresh start.
This only comes through careful budgeting during your Trust Deed and honest communication with your advisor about any changes in circumstances that could affect your ability to pay. You cannot cancel a Trust Deed as it is a legal agreement.
If you are struggling with your Trust Deed, before you assume that everything is lost talk to your advisor. Circumstance changes, such divorce, might not mean your Trust Deed has to instantly fail. Payment breaks can be possible if you have proven yourself to be reliable thus far, and this can afford you time to sort out your finances so that you can continue payments the next month. The missed month is then added onto the end of your trust deed.
Despite this, occasionally, Trust Deeds fail. This happens when you stop paying into your Trust Deed and your Trustee loses faith into your ability to pay. Your Trustee will then terminate your Trust Deed. This means that:
- You are no longer protected from your creditors. They can contact you once again
- Trustees may petition the court for you to enter into sequestration
- Your fees and interest will become unfrozen
- Creditors may lose faith in your ability to pay and petition the court for sequestration, or for wage arrestment or another court order
There are other debt solutions, however, that can still be explored if you fail your Trust Deed. It is a good idea to explore these and take the initiative to contact your creditors as soon as possible with a suggestion as to how to pay your debts in order to stop them from taking action against you.
You can suggest a Debt Management Plan, for example. This is similar to a Trust Deed as it involves you paying an affordable manageable monthly payment based on your actual income and expenditure. However, your creditors are not obligated to freeze interest, although sometimes they do, and none of your debts will be written off.
This means that the less you pay monthly, the longer it will take to pay off your debts. Rather than paying for four years, you could now be paying for over a decade.
Another option is the Debt Arrangement Scheme, which allows you to enter into a Debt Payment Programme. This programme is similar to a DMP as you pay reduced payments until your debt is completely paid off. However, a DPP is a formal solution and so your interest and fees are frozen, and creditors shouldn’t contact you. However, you must still pay off the full amount, which could take significantly longer than four years.
Ultimately, there are still options available to you if you fail a Trust Deed. However, it is important to note that a Trust Deed is often the fastest way to gain a fresh start without the need to sell your assets. It is always worth communicating with your Trustee about your situation to see if there is a solution that allows you to continue with your Trust Deed.
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