What is a Scottish Trust Deed?

A Scottish Protected Trust Deed is a formal, legally binding arrangement between an individual and their Creditors which typically lasts for a period of 4 years. It is a legal agreement which can only be carried out through a licensed Insolvency Practitioner. It is only available to residents of Scotland and it is designed to help people struggling with significant, unsecured debts (more than around £6,000). Debts remaining at the end of the 4 year period, are effectively written off by Creditors, subject to some exceptions.

A Scottish Protected Trust Deed reduces unaffordable multiple payments to Creditors to a single affordable monthly payment. It offers protection from Creditors taking legal action against you, and protects your home and car from repossession.

If you would like no-obligation help with entering a Trust Deed we suggest contacting us, Scotland's Leading Trust Deed Company.

How does a Scottish Trust Deed work?

Step One

Consult an Insolvency Practitioner (also referred to as a Trustee) who will sit down with you and discuss your personal financial circumstances and your financial needs. This enables them to help to draw up a realistic budget and to determine the level of affordable monthly payment you can make towards your debt. This single monthly payment will replace all your other monthly repayments to existing Creditors. This forms the basis of the Trust Deed which will be submitted for approval to Creditors. It is an important step towards securing you protection from Creditor action, from other forms of legal action or from your wages being arrested.

Step Two

Once a Trust Deed is signed, your IP will send proposals to all relevant Creditors, clearly spelling out how much you propose to pay, how assets will be dealt with and how much Creditors can expect to receive over the lifetime of the Trust Deed. Creditors have five weeks to object or agree to the proposal. If they fail to respond it is assumed they agree with the proposal. It is only if Creditors accounting for more than a third of the value of your total debts object to the proposal that the Trust Deed will fail to become protected. In the majority of cases we have handled, this does not occur. However, even if this were to happen, your Trustee would be able to provide further advice and to discuss alternative solutions with you.

Step Three

If the proposal is accepted by your Creditors then the Trust Deed officially becomes a Protected Trust Deed. For people worried about losing their homes or other assets, this removes a huge amount of stress as creditors are then barred from taking legal action to recover their debts. If you are a homeowner, the level of equity (difference between the value of your home and the amount you owe on it) is determined at the start of the Trust Deed. If you have a lot of equity in your home, it may have to be released to pay Creditors - but that does not mean you are forced to sell, there are ways to do this which can avoid a forced sale.

Step Four

Once all payments have been made, normally over 48 months, and all terms have been complied with, you will be issued with a discharge letter. What this means is that you are no longer liable to repay any of the debts that were included in the Trust Deed.

Advantages

Payments are based on your budget and what you can reasonably afford to pay.
The Trustee will deal with all Creditors, immediately removing any pressure from unwanted phone calls and communication.
All administration is dealt with by the Insolvency Practitioner.
Once the Trust Deed has become “Protected” Creditors cannot take legal action to recover their debts and are bound by the terms of the Trust Deed.
It allows you to regain some control of your finances
All costs are met from the monthly contributions you make into a bank account held in trust for Creditors. Administration fees are agreed between the Insolvency Practitioner and Creditors, and are deducted from the monthly payment you make and, if appropriate, from the sale of any assets.
After four years some of your debts may be written off, depending on the terms of the arrangement.

Disadvantages

If you are a homeowner and have equity in your property (or any other particularly high-value assets), this must be released to pay Creditors. There are ways to do this without the need to sell your property, for example by remortgaging. Alternatively it may be possible to extend contributions from income for a longer time.
Creditors can vote against a Trust Deed becoming “Protected”. However it is only if the majority of Creditors object that the Trust Deed would fail to become “Protected”. If this was to happen there are other potential debt solutions we can advise you on.
There are certain professional bodies which prevent members from signing a Trust Deed. We can help advise on whether this is likely to be an issue for you.
Individuals may find it hard to get credit once a Trust Deed has completed. Creditors and credit rating agencies will assess risk level based on financial history and this will include the Trust Deed, although your credit rating will improve over time as you tackle your debt.