What Debts can’t I include in my Trust Deed

Certain debts are unable to be included in your trust Deed.

Provision will be made to enable you to maintain the repayments to these debts as part of your Trust Deed assessment.

Here are the types of agreements that will not be dealt with by a Trust Deed

• Mortgages.
• Secured Loans.
• Hire Purchase Agreements.

All of the above agreements are known as Secured debts.

This means the creditor has security over the property that was bought with the borrowed money, and this means the creditor has the right to repossess and then sell that property should you fail to maintain the repayments.

It is therefore clear that repayments to secured debts should be considered a priority, to avoid the risk of repossession and subsequent loss of the property concerned.

However, if a repossession and loss of property is experienced, and a ‘shortfall’ is created by the finance company selling the property for less than the outstanding balance of the loan, the resulting shortfall can be included in a Trust Deed, as the debt would have become unsecured at the point the property had been sold.

• Student Loans.

This type of loan also causes issues with regard to Trust Deeds.

Student Loans are a special loan provided by the Student Awards Agency for Scotland or one of its predecessors and, among other benefits, these loans include a very low interest rate and a repayment term which is based on the income of the recipient, therefore the loan could take many many years to repay.

As a result of this, Student Loans are not cancelled by either Bankruptcy or Trust Deeds.

Instead, provision will be made, when appropriate, for the repayment of a Student loan to take place in the normal manner.

• Debts incurred through criminal activity.
• Court Fines
• Debts being collected through Diligence.

In most cases, these types of debt are not able to be cancelled by a Protected Trust Deed, and they would have to be repaid under existing or alternative arrangements.

The exception to prove the rule would be Council Tax arrears being collected through Diligence, with many councils being prepared to lift the diligence to allow for the Trust Deed to deal with the debt.