Protected Trust Deed
A Protected Trust Deed in Scotland is a legally binding arrangement between a person and their lenders, usually lasting for a duration of 4 years, although a longer period can be considered depending on your circumstances.
A Trust Deed can only be carried out through a licensed Insolvency Practitioner (IP) who will then act as the Trustee.
This form of debt solution is only available to residents of Scotland and is designed to provide debt help individuals who are unable to repay their debts (more than £5,000) over a period of time. At the end of the period any remaining debt not paid of over this time, is usually written off by creditors.
What Is a Trust Deed?
A trust deed is a mutually consensual agreement between you and the people you owe money to. You agree to pay a regular amount of money towards your debts and at the end of a fixed time the rest of your debts will be written off.
All your belongings and property (assets) are given to someone who will look after your financial affairs. They are called your trustee. The trustee aims to pay your creditors as much as possible of the debt owed to them. This may involve the sale of some of your assets so that the money raised can be paid to your creditors.
A trust deed can become ‘protected’ if most of your lenders are happy with the terms of the trust deed. This means that the trust deed is compulsory on all creditors and they cannot take any steps to recover their money.
If a trust deed is not ‘protected’, it will not be binding on all of your lenders and they could still take action to recover the money owed to them.
A trust deed is one of the debt solutions available to you if you have debt problems. Money Advisor does not deal with Scottish debt solutions but can put them through to a partner company.
Am I Eligible for A Trust Deed?
To be eligible for a Trust Deed, you need to be a resident in Scotland and be able to make payments in the schedule set out and agreed with the creditors and trustee.
- Debt level – £5,000 or more
- Able to make regular payments – you have enough money to make a regular contribution towards your debts
- No more contact from your creditors (Who you owe money to) – Your trustee will handle all communications with your creditors, relieving the stress of doing this yourself
- No more enforcement action – if you are thinking of setting up a trust deed, you can apply to the Accountant in Bankruptcy to stop your creditors taking any steps to recover the money you owe them
- You are not barred from certain types of employment or public office as you would be under bankruptcy (Sequestration in Scotland)
- Borrowing money – you are not legally stopped from borrowing money (obtaining credit) like a mortgage or a credit card, although this may be difficult to get in practice due to credit scores
- Debts wiped out – your trust deed will usually come to an end after 4 years (called discharge). Most of your debts will be wiped out and you will not have to pay them back.
- You must attempt to release any equity in your property to pay your creditors by sale or remortgage, if this cannot be released, the Trust Deed may be extended
- Your credit report will be affected for 6 years
- You cannot be a company director and if you are self-employed the trustee may arrange for someone else to run the business or even sell it
- Creditors can object to the Trust Deed becoming protected
- Debt Arrangement Scheme (DAS) – This is a good option if you can afford to pay off your debts in full from your disposable income in less than 4 years. There is more information about DAS on our Debt Arrangement Scheme page
- Sequestration – If your financial situation has become uncontrollable because you can’t pay your debts as they fall due, you can apply for Sequestration, essentially bankruptcy. If you have debts of £3,000 or more, you have little or no disposable income or assets that can be used to raise money.
Advantages of Trust Deeds
The advantages of protected trust deeds are:
Disadvantages of Trust Deeds
The disadvantages of protected trust deeds are:
Alternatives to Trust Deeds
Trust deeds are not the only option to help you sort out problems with your debts. Our team of advisors will be able to run through the best options for you based on your circumstances, these can include –
Applying for a Trust Deed
To apply for a trust deed, you first need to understand your eligibility. Contact our team of advisors to get a better understanding of whether this is the best debt solution for your needs.
- Check eligibility
- Understand all options available
- Consider advantages & disadvantages
- Agree terms & sign your trust deed
- Get your trust deed protected
- Begin making monthly payments
Get Debt Solutions from Our Experts
Money Advisor is committed to providing the best possible service to all those who need help with their finances. If you are struggling to make ends meet or perhaps have experienced a change in circumstances that have affected your ability to manage your finances, please contact us as soon as possible, we will complete a thorough, impartial examination of your individual situation and put you on the road to financial recovery.