How To Live With A Scottish Trust Deed – A Definitive Guide

Getting your protected trust deed approved can feel like an enormous weight being lifted from your shoulders

But what’s it really like to live with?

Debt can have a crippling effect. From your credit rating to your relationships to your health and wellbeing, unmanageable debt affects every part of your life. According to a report by the Money and Mental Health Policy Institute, more than 100,000 people attempt suicide because of debt. And that’s just in England. In Scotland, debt has increased by 47% since 2013.

If you’re struggling with debt, there’s lots of help available to help you escape. There’s no single route that’s right for everyone, but a Scottish trust deed is an option that was chosen by 7,283 Scots last year, and it helped cut their monthly debt payments by an average of 60%. You can find out more about how trust deeds work here.

A trust deed typically stays in place for four years. After that, all the debt covered by the trust deed is wiped. But what’s it like to be in the middle of a trust deed? Do you have enough money to live on? How are people with trust deeds in place managing to budget? And what happens if your circumstances change?

Will a trust deed make me feel better?

The moment your trust deed becomes protected and ‘locked’ in place, there’s an immediate effect on your wellbeing, and for a number of reasons:

Two years into a protected trust deed, however, does it still feel like a good idea? One of the things we hear most often from people who take the trust deed route is that it’s not a holiday, but it’s not a prison either. It does depend on your ability to stick to a tight budget – but providing you take the opportunity offered by the trust deed, the positive effects last.

How will I afford to live while my trust deed is in place?

Once your trust deed becomes protected, the trustee will take a proportion of the money you earn each month and use it to pay your creditors. You’ll need to manage what’s left carefully (see budgeting, below) but is it enough to live on?

In most cases, our clients say it is. You need to budget carefully and it isn’t easy, but it isn’t impossible either. Practically, that makes sense. There’s little point in creating a system that helps you out of debt and which helps creditors recover some of the money they are owed, only to have it fail.

So when the trustee arranges your trust deed, its affordability will be a key consideration. The amount you are required to pay will be carefully calculated using the Common Financial Tool (a calculator established in the trust deed legislation) to ensure that you can afford the payments without falling back into debt.

How to stick to your budget

Living within your means so that you stick to the terms of your trust deed may involve making significant changes to your spending habits. You’re unlikely to have access to credit cards or any other form of credit, so you’ll have to budget carefully.

We spoke to insolvency practitioners who gave us their top budgeting tips here. But what about those who have been through the trust deed process? We spoke to a number of people who’ve escaped debt via a protected trust deed and asked them for their ‘trust deed life hacks’. In no particular order, here’s what they told us:

• Make friends with Excel

You can’t keep a weekly budget in your head as things will always be forgotten, and pieces of paper are easily mislaid. So keep a simple spreadsheet of incomings and outgoings. If you don’t know how to use databases, there are lots of free, simple tutorials online, like this one. Alternatively, use a (free) app to track your spending.

• Replace shopping

Retail therapy isn’t therapy if you don’t have much money to spend. And as Forbes noted, it’s definitely not therapy if it ends in remorse. So if shopping is a favourite pastime, find something to replace it rather than putting yourself in temptation’s path. Walking, jogging, cycling, gaming, gardening, visiting museums or galleries, going to the beach or a local park are all free or low cost alternatives.

• Prepare for the bigger bills

You know that every year the car will need a service, or that at least one piece of kitchen equipment will need replacing. If you can, put a little money aside each month so that when those costs arise, they don’t derail your trust deed repayments.

• Do I really need this

Get into the habit of challenging yourself before every purchase. If you really need it and can afford it, buy it. If you don’t, leave it on the shelf.  

• Get strategic about coupons and vouchers

Sign up to money saving sites so you don’t miss coupons that could save you money on the things you buy every day. Remember, only use coupons for products you need anyway.

• Get a little help from friends

Talking about your situation can be an enormous relief – and you could help others who are in a similar situation, but being open and honest about your trust deed can make a practical difference too. Rather than having to say no to social occasions, suggest cheap or free alternatives (DVD or game nights, simple get-togethers) that mean you don’t have to cut ties with friends or miss out on fun.

What happens if my circumstances change?

A change in income (for better or worse), can mean big changes for your trust deed and your monthly payments. To find out more about how everything from a pay rise or redundancy to an inheritance or PPI pay out could affect the way you live with your trust deed, read this.

Take advantage of help

At any one time, there are thousands of people just like you working their way through a trust deed. And from support groups to forums to online advice guides, there are endless ways to get help, not just in budgeting and living frugally, but with the emotional support that makes it easier to complete the trust deed successfully.

If you’re wondering whether a trust deed is right for you, talk to us.