Trust Deeds
A Protected Trust Deed (PTD) is a debt solution available in Scotland, which puts in place a legally binding agreement between a person and their creditors, administered by a Trustee. Available for a standard duration of 4 years, a PTD can also be used over a longer period in certain circumstances.
The goal of a PTD is to set a payment plan for debts of over £5000, after which any remaining debt is usually written off by creditors. It is only available for Scotland residents, and can only be put in place through a licensed Insolvency Practitioner. This Insolvency Practitioner will then work as the Trustee.
Although a voluntary and mutually consensual agreement, you will be bound by its terms once it is established. However, once the Trust Deed has received the support of your creditors and becomes ‘protected’. This means that your creditors are also bound by it and cannot pursue other means to recover debts from you.
To establish a PTD, you must have assets, which are then given to your Trustee to administer your financial affairs and to pay back as much of your debt as possible. This may involve the sale of some of your assets.
If a Trust Deed does not become ‘protected’, your creditors will still have the right to take action to recover your debts.
Who is eligible for a Protected Trust Deed?
To enter a Trust Deed, you must be a resident of Scotland. As a debt solution that requires the agreement of your creditors, you must also be able to make regular payments over the term of the agreement (usually four years). It is also defined by your level of debt – meaning that it is only available for debts which exceed £5000.
Your assets are also included in a Trust Deed.
Individuals meeting these criteria stand a good chance of success if they attempt a PTD, and we will refer you to a partner organisation who specialises in Trust Deeds.
Why choose a Protected Trust Deed?
There are many advantages to a PTD, from the relief you can get from demanding communications from creditors to the prospect of debts being written off at the end of the term.
An end to creditor pressure
The Trustee will take on the role of handling correspondence with your creditors, who will no longer be able to pursue you directly for the recovery of loans.
No enforcement action
The Accountant in Bankruptcy has the power to stop creditors taking action to recover money from you, and you may apply to them for such relief when setting up the Trust Deed.
You may still seek credit
During a PTD you are not barred from obtaining credit, such as a mortgage or credit card, though you should be aware that in practice this may still be difficult due to your credit score.
Debts may be written off
At the end of the 4-year term of the PTD, you are officially discharged from its terms. At this point, if you have abided by the terms of the repayments, any remaining debts are written off.
Your employment or duties will be unaffected
Bankruptcy (or Sequestration in Scotland) bars individuals from certain forms of employment or public office, but with a PTD this is not the case.
Disadvantages of a Trust Deed
Credit Rating
Your credit rating will be adversely impacted.
Insolvency Register
If approved, your Trust Deed will appear on a public register of insolvencies.
Secured Debts
Any asset that has lending secured against it (think of a mortgage on a house or vehicle finance) that you do not want to be repossessed has to have the ongoing payments maintained, so a Trust Deed is not a form of debt relief from secured lending.
Priority Debts
Magistrate’s Court fines, court orders under matrimonial and family proceedings, etc. still need to be paid. A Trust Deed is not going to provide you with debt relief from these.
Approved Trust Deed Subsequently Fails
An Trust Deed is not as flexible as the informal debt solutions. If you fail to keep one of the promises you make (for example, by missing promised monthly payments, or not returning annual Income & Expenditure Review items) then your Trust Deed risks failing.
If your Trust Deed fails, you may still face bankruptcy proceedings.
Income & Expenditure Review
Every year, you will be expected to carry out a review of your Income & Expenditure. This often means that you have restrictions on your personal expenditure.
Jurisdiction
This is only available for people living in Scotland.
Debt Arrangement Schemes (DAS)
If you have the means to pay off your debt in less than 4 years, without entering a PTD, then a DAS may be available to you.
Sequestration
If you are unable to pay your debts, amounting to more than £3000, then you may require Sequestration. This process is similar to bankruptcy and may be used when your disposable income or assets are insufficient to repay what you owe.
How do I use a Protected Trust Deed?
We will refer you to one of our trusted partners who are specialists in providing Trust Deeds.
They will evaluate your circumstances and determine if you meet the relevant criteria.