One debt solution available in Scotland is a Protected Trust Deed. Around 7,000 Scottish people enter this insolvency solution to resolve their debt problems every year.
It is believed by the AiB that there have been 'abuses of Protected Trust Deeds' in the past which they want to eradicate in the interest of creating a more transparent and fairer debt solution.
This positive step ensures that people in debt in Scotland, and being advised of a Trust Deed, are being given the right debt advice. Many people who may have been better suited to a MAP or Certificate of Sequestration route into bankruptcy, may have only been given the Protected Trust Deed option.
The Trust Deed is an ideal solution for some people, however, there are other debt solutions which are often ignored by some organisations. At Debt Support Trust, our charity advisors are obligated to provide the pros and cons of every debt solution to ensure you can accurately decide which option Is right for you.
What are the changes to Protected Trust Deeds?
The Scottish body managing Protected Trust Deeds, the Accountant In Bankruptcy (AiB), believes that the success rate of Trust Deeds is too low, the fees are too high whilst creditors are not being given enough control of the solution.
Based on information released by the AiB, the changes in November 2014 will include:
- Trust Deeds being accepted from upwards of £5,000 of unsecured debt.
- The Trust Deed will not be accepted if the debts can be 100% repaid in 48 months or less.
- Fees from companies that gather paperwork and fact find will not be accepted in the future.
- Trustee's in a Trust Deed will no longer be able to charge an hourly rate, instead the funding model will move towards a similar model to the English, Welsh and Northern Irish IVA.
- Before a Trust Deed can be Protected, the creditors must accept the fees proposed by the Trustee. If fees need to be increased, for whatever reason, the creditors must approve these costs before they can be increased.
- Social benefits, like Jobseeker's allowance, cannot be used to make a contribution towards the debt solution.
Our advice team will be attending the Accountant in Bankruptcy seminar on the Protected Trust Deed changes later in October and we'll share any useful findings on changes to Trust Deeds. We anticipate the number of people entering a Protected Trust Deed will decline as stricter rules are imposed.
Worryingly, many industry experts believe that these new regulations will increase the number of people being forced into a bankruptcy route. This is believed to be the case because the new regulations do not include Certificate of Sequestration.
People already in a Trust Deed do not have to worry. If you are considering entering a Trust Deed ensure you have sought advice to guarantee you're fully aware of all the options.