Trust Deeds

Last Updated: 02.12.2010

Bankruptcy is not the only solution for people with serious debt problems. A 'trust deed', by which you voluntarily transfer some or all of your assets to a trustee to administer on behalf of the creditors, is both less formal than bankruptcy and may also avoid some of the legal restrictions which follow from being made legally bankrupt.

Find out more about Trust Deeds below.

What is a Trust Deed?

A trust deed is a formal agreement between you and your creditors. It passes your assets and property to a trustee to be administered for the benefit of creditors and the payment of debts. Once the trust deed is set up it is legally binding.

Providing it meets certain conditions, a trust deed may be recorded in the Register of Insolvencies as a 'protected trust deed'. This prevents the creditor from making you bankrupt so long as you stick to the terms of the trust deed.

Important information about Trust Deeds

If you enter into a trust deed that later fails, this may stop you from being able to deal with your debts through a debt payment programme under the Debt Arrangement Scheme.

Think very carefully before signing a trust deed and seek advice. You may want to consider an application for a debt payment programme under the new Debt Arrangement Scheme before opting for a trust deed.

Advantages of a Trust Deed

• Debts are frozen at the date you sign the trust deed. Creditors should direct correspondence to the trustee rather than you.
• You can still have a bank account. This is usually an instant access type account where you can use a cash card but no cheque book, cheque card or overdraft facility.

Disadvantages of a Trust Deed

• You cannot take out credit over £250 during the trust deed period.
• Only the creditors who agree to the terms are bound by the trust deed.
• If you do not cooperate with the trustee, they can try to make you bankrupt.
• You cannot be a director of a limited company.