Scottish Trust Deeds and Protected Trust Deeds (PTD)

The proposal normally provides for you to make monthly contributions over a pre-agreed period of time, which is usually a minimum of 4 years.  You are protected from creditor action and interest and charges accruing from the date of approval. Monthly payments will be based on what you can afford. Any debts remaining at the end of the period of the Trust Deed are written off.

What is the criteria for a Protected Trust Deed?

The criteria for a Trust Deed includes:

• You live in Scotland or you have lived there in the past year
• Demonstrate you cannot afford to pay your debts in a reasonable period of time
• You must have debts of at least £5,000 for a Trust Deed to become protected

Trust deeds can be voluntary, however, to receive legal protection against creditors you will have to make it a legally binding ‘Protected’ Trust Deed. For this to happen, you need approval from creditors who represent at least a third of your overall debt balance. Trust Deeds must be put forward to your creditors by a Trustee (Licensed Insolvency practitioner).

If for whatever reason your Trust Deed fails, you could face Sequestration and interest that was previous frozen could be re-applied to your debts.

What happens to my property?

If you have a property and there is equity in the property, your trust deed will normally require that your share of equity is paid into your arrangement. This can be done by remortgaging your property or for a 3^rd party sum to be paid on your behalf. The value of your equity (the difference between the value of the property and the amount you owe to the secured lender(s)) is determined at the start of the Trust Deed.

What is the cost?

The fees charged by your Trustee should be explained to you upfront.  Creditors voting on trust deeds will frequently restrict the level of fees that your Trustee can charge. The fees come out of your contribution and after deduction of fees and expenses, creditors will get the balance.

What else do I need to know?

Only a licensed Insolvency Practitioner can propose the arrangement on your behalf. They will review your income and expenditure in line with the necessary guidelines to determine what affordable contributions can be made towards your debts. This single payment will replace all of the monthly payments to existing creditors. Once the Trust Deed is signed, proposals will be sent to all relevant creditors. Creditors have 5 weeks to object or agree to the proposal. Once the proposal is accepted, the Trust Deed becomes protected and creditors can no longer take legal action to recover their debts.

The decision lies in the hands of the creditors. If less than a third in value or half in number object; the trust deed becomes protected.

During the drafting stage of your Trust Deed, your trustee will advise you what you should do in relation to your creditors until it’s approved.

You will have to declare any inheritance or windfalls above the value of £500 to the Insolvency Practitioner. Regular overtime and bonuses will also be taken in to consideration and there may be restrictions on your expenditure.

If you incur debts after the date of approval, these debts will not be included into the solution and you will need to continue to pay your Trust Deed contribution.

Will my credit rating be affected?

Your credit rating will be affected for 6 years from the date your PTD is approved. You cannot borrow more than £500 whilst you are in a PTD without notifying your creditors you are in a PTD however, before borrow anything, you should discuss this with your trustee.

If you do decide to go ahead with a Trust Deed, your details will be added to the Register of Insolvencies which is a public register.

Important Information

The Debt Advisor Ltd is authorised and regulated by The Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. All debt solutions should be very carefully considered.  The Debt Advisor do not offer Scottish debt solutions, if you are based in Scotland, struggling with debt issues and need advice on your options, we are happy to refer you to appropriately regulated debt solutions practice who can offer advice on all solutions.

If you then decide to use their services, we will receive a fee for introducing you, or for the preparatory work we complete. The Debt Advisor Ltd is a commercial organisation and if you choose a solution we provide, fees will apply.

There are sources of free debt advice and services. You can find out more by contacting the Money Helper (Scotland) on 0800 138 7777 or by visiting their website

Trust Deeds – The benefits and the risks

Benefits

• When a trust deed is accepted and given ‘protected’ status interest, charges and debt collection will stop.
• A protected trust deed would include most unsecured debts. Some debts are excluded, like student loans and fines
• You make one monthly payment. This is based on what you can afford.
• Trustee payments are taken from your monthly payments.
• When you make your final payment, your debts will be written off.
• Your Trustee will deal with your creditors for you.

Risks

• Your Protected Trust Deed is kept on the public Register of Insolvencies for at least five years.
• Your trust deed will show on your credit file. It will stay here for six years, and you may find it harder to get credit.
• You may need to sell assets (items of value). Your trustee will decide what will be sold.
• Creditors may then backdate interest and charges. If you do not finish your protected trust deed, your debts will not be written off. There is a risk of bankruptcy if the Trust Deed fails.
• Creditors may not accept your Protected Trust Deed and they may apply to make you bankrupt.
• Homeowners may be expected to pay some (or all) of their equity towards their debts. If there is equity in your residential property you may be asked to refinance to pay off your debts. Remortgaging may attract a higher interest rate.
• You have to live within an agreed budget for the period of the Trust Deed.