Trust Deed Scotland
What is a Protected Trust Deed?
A Protected Trust Deed is a legally binding agreement with your unsecured creditors to repay all or part of what you owe them. A Trust Deed is only available to residents living in Scotland. If you’re currently living England, Wales and Northern Ireland you may be eligible for a IVA, or consider a debt solution which is not legally binding, such as a Debt Management Plan, or Debt Consolidation Loan.
Protected Trust Deeds are less formal than bankruptcy and may also avoid some of the legal restrictions which follow from being made bankrupt. As long as you stick to the terms of the trust deed it prevents your creditors from taking further action against you to get their money back.
What does a Trust Deed involve?
A trust deed involves transferring any assets you own to a Trustee so that they can be sold to raise money to pay to your creditors and will also require you to make contributions from your income for a fixed period, usually four years.
Once you have paid all the payments due under the terms of your Trust Deed and any assets have been dealt with then any remaining balance of debts is written off, this includes credit card debt, council tax debt and payday loans.
A Trust Deed and your assets
Although a Trust Deed requires your assets to be transferred to the Trustee you will be able to keep basic household items. You may also be able to keep a car that you reasonably need. Property which is transferred to the trustee may be sold whenever it is in the interests of your creditors to do so.
If you own your home and there is any equity in it, you may have to realise part of this by way of remortgage, additional payments or, in extreme circumstances, your home could be sold although this is a last resort and creditors will not usually require this.
If your income is made up of only benefits, you cannot set up a trust deed. If you work but also receive some benefit income, the amount you pay under the trust deed cannot be more than the amount you earn each month.
The Trustee must be a licensed Insolvency Practitioner (IP).
- Payments are based on your circumstances and what you can reasonably afford to pay.
- Your Trustee will contact your creditors, which will remove the pressure of unwanted phone-calls and letters.
- 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.
- All costs are met from your monthly contribution payments which you make into a bank account held in trust for creditors. The Trustee’s fees and expenses are agreed between them and your creditors and are deducted from your monthly contribution payment and, if appropriate, from the sale of any assets.
- At the end of the Trust Deed, normally a period of 4 years, the balance of the debts included in your Trust Deed will be written off.
- If you do not cooperate with the Trustee, they can try to make you bankrupt.
- You cannot continue to be the director of a limited company unless your trustee agrees and unless the rules of the limited company allow you to enter into a trust deed.
- Some public bodies, such as councils, may have rules that prevent you from holding office with them.
Trust Deed Help & Advice
If you live in Scotland and think this could be the right solution for you, contact Creditfix to speak with one of our advisers, Alternatively fill in the form above and we can give you a call back.
Trust Deed Scotland Frequently Asked Questions
The IP will help you to draw up a realistic budget and to determine the level of affordable monthly payment you can make towards your debt. They will then prepare and issue a Trust Deed document to your creditors to show how much you can afford to pay each month and whether you have any other assets that may be used to provide additional funds.
If you are a homeowner, the level of equity in your home is determined at the start of the Trust Deed. If you have a lot of equity in your home, it must be released to your Trustee to pay to your creditors. The Trustee will discuss with you the different ways to release your equity before you sign your Trust Deed. Every situation is different but it is highly unlikely that you will be forced by your Trustee to sell your property.
Creditors have five weeks to either accept or object to the proposal. If no objections are received or if any objections that are received are not a majority in number or are less than one third in the total value of your debt, the Trust Deed achieves what is called “Protected” status. If sufficient objections are received then the Trust Deed will fail. If this were to happen your Trustee would resign and you would be given further advice. If your creditors do not respond it is considered that they have agreed to the proposal.
Once your Trust Deed is Protected your creditors are unable to take action against you to recover your debts.
As long as you make all payments due and dealt with any equity in your home then at the end of the agreed term any balance of debts remaining is written off.
Payments to any secured creditors such as a mortgage, secured loan on your home or a hire purchase agreement must continue to be made and they are not included in the Trust Deed. An allowance will be made for these payments in calculating the amount you can afford to pay each month.
The trustee will charge fees for setting up and administering your trust deed. Total fees are usually about £4,000 or more. These fees will be paid out of the monthly instalments you pay or through sale of any assets you have and your trustee will not charge you any fees before the trust deed is set up
If the trust deed becomes protected it will appear in the ‘Register of Insolvencies’, which is the public register. Credit reference agencies hold information about trust deeds and protected trust deeds for a period of six years. This can make it difficult or more expensive to get further credit.
Once signed, a Trust Deed is registered on the Register of Insolvencies. From the date of registration unsecured creditors have 5 weeks to lodge any objections to the proposal submitted to them. All objections must be submitted to the Trustee in writing prior to the end of the five-week period. The Trust Deed will become Protected unless objections are received from either a single majority of creditors in number or more than one third in value. Once Protected, all of the unsecured creditors whose debts were due prior to the date of the Trust Deed are bound by the arrangement. No further action can be taken against you for these debts unless they fall under one of the small number of exceptions detailed above. If sufficient objections are received, your Trust Deed will fail to become Protected. You are under no obligation, but you may wish to consider alternative solutions, Such as the Debt Arrangement Scheme or Sequestration. The Register of Insolvencies is a public register which can be accessed by anyone. It is commonly used by organisations, such as a bank, to monitor the position of their clients.
Once you have paid all of your agreed contributions payments and fulfilled your obligations under the arrangement then you will receive your notice of discharge. The Trustee will make payment to the creditors and any remaining balance will be written off. Please note that it can take between 3 to 6 months to conclude your arrangement formally.
A six-week period in which creditors are unable to take further action. The application is submitted to the Accountant in Bankruptcy to allow you time to decide whether to enter a debt solution.
The property will be valued by an independent valuer and details of the redemption figure due to your secured lender(s) will be obtained to confirm your share of the equity, if any, in the property. Equity in your property is considered an asset and we will reach an agreement with you prior to you signing the Trust Deed, which may involve you having to remortgage or extend the period of your Trust Deed period, normally 12 months depending on the level of equity. Equity – Is the property value minus the sum owed on the mortgage and secured loans.
Most unsecured debts can be included, although there a small number of exceptions these include, Student Loans; debts obtained fraudulently and Court fines.
There is flexibility. If your circumstances change, please contact us to discuss the options. In the short term, it may be possible to suspend your monthly payments and extend the period of your Trust Deed.
If your car is valued at less than £3,000 it will be unaffected by the Trust Deed. If the car is valued at more than £3,000 it will be considered an asset. An agreement will be reached prior to signing the Trust Deed and if necessary you may be asked to extend the period of your Trust Deed to pay the value of the vehicle.
It is normal practice for you to be advised to change your bank account prior to signing the Trust Deed if you have debts with your current account provider, however if you find yourself in a position whereby you bank account is frozen then this office will arrange to contact the bank direct to unfreeze the account on your behalf.
Your income and expenditure will be reviewed annually by this office, however if your circumstances change throughout the period of your arrangement then an additional review will be required. If your surplus income increases, then you will require to increase your monthly contribution payment accordingly.
Any assets that you acquire during the Trust Deed period will be ingathered to the Trust Deed estate for the benefit of creditors.