A Protected Trust Deed is a formal debt solution which, if accepted by both parties, legally binds you and your creditors to its terms. A Protected Trust Deed usually lasts for 3 years however it can be longer or shorter depending on circumstances.

It is an alternative to Sequestration.

If you meet the criteria for a Protected Trust Deed and wish to proceed then an insolvency practitioner is required to administer your case. The stages to gain a Protected Trust Deed are;

1. The insolvency practitioner and their team will put a proposal to your creditors based on your disposable income and any available equity within any assets.

2. An advert is then placed in a trade publication called the Edinburgh Gazette.

3. Your Trust Deed will be 'protected' as long as no more than 1/3rd in value of your debt or a majority in number of your creditors object to your proposal.

A Protected Trust Deed will take at least 6 weeks to be set up, however it's likely to be longer. The time taken to establish a protected trust deed depends on how complex your case is, for example if you have a property then a redemption statement will be required from your mortgage lender to establish your available equity.

A protected trust deed typically lasts for 3 years, however in some instances this can be extended to make the minimum repayment to creditors.

Your creditors have the right to reject your Protected Trust Deed proposal. However, it's unlikely an insolvency company will put a proposal to your creditors if they do not think your creditors will accept.

If a Protected Trust Deed is suitable for you then a Debt Support Trust debt advisor will fully advise you on the process.

When you put a Trust Deed proposal to your creditors you are accepting you have a debt problem and will not realistically be able to repay the money borrowed. Your creditors will only get back a proportion of the money they lent you but the alternative solution would sequestration, where they may get back even less.

Your creditors will make a decision on whether your proposal is accepted based on whether the proposal is the best financial option for them.

Usually an insolvency practitioner will only be interested in the available equity in your house. A Protected Trust Deed aims to ensure you keep your property. Depending on your specific situation you may need to downsize your car, however this is determined on a case by case basis. A qualified debt advisor will be able to inform you accordingly.

An expression widely used in advertising within the debt industry is to "write off debt". You cannot simply write off your debt, however if you are suitable for a Protected Trust Deed you repay what you can afford. Any outstanding debt left at the end of the term of a protected trust deed will be cleared. In a Protected Trust Deed you must be able to repay at least 10% of the money borrowed but the more you repay the more likely your creditors are to accept your proposal.

The average return to creditors is between 30-60% of the debt accrued.

You must not take out credit (above £500) whilst in a Protected Trust Deed as this breaches the terms of your agreement.

A Trust Deed gains protection (and becomes a Protected Trust Deed) after the creditors accept your proposal. This usually take 5 weeks after your Trust Deed is signed and the Edinburgh Gazette advert has been released.

Once your Trust Deed has been signed and is protected you cannot change your Trustee to another company.

If you are owed money from an outstanding Payment Protection Insurance (PPI) claim then this would be considered as an asset which you own. All assets in a Trust Deed must be realised and any available equity should be included within your Trust Deed.

If you PPI claim is higher than your total amount of debt then you can use this money to repay your debt and avoid the Trust Deed debt solution.

In short, any PPI money will be reclaimed for the benefit of your creditors by your Trustee and it will all be included within your Protected Trust Deed.

If you come into money whilst in a Protected Trust Deed you must notify your Trustee. The Trustee has a duty to reclaim as much money as is possible for the creditors, this includes money you may have inherited.

There are some differences between a debt management plan (or debt arrangement scheme - DAS - in Scotland) and a Protected Trust Deed. A debt management plan is an informal arrangement with your creditors where you pay an affordable amount each month until all of the debt has been repaid. You have no protection from your creditors in a Debt Management Plan.  A DAS will protect your assets, such as your house from your creditors.

A Protected Trust Deed is a formal arrangement which will allow you to repay a percentage of your debt with the remaining debt being written off at the end of the solution, as long as you meet all of your Trustee's requests. The Protected Trust Deed in Scotland usually lasts for 3 years. You cannot start and stop a Protected Trust Deed like the Debt Management Plan and if you fail the Protected Trust Deed your Trustee may decide to proceed with Bankruptcy.

Our property has negative equity so can we still enter a trust deed and if so, what will happen to our property?

If you property has negative equity then there is no available money to release and you will be able to retain your property and enter the Trust Deed. If your property has equity at the end of the solution you will be required to release this money. You can usually make a nominal payment at the start (it must be from a third party) to protect any equity your house generates in the future.

A common question is whether an employer can stop a person entering a Protected Trust Deed. The answer lies in your terms of employment contract. Some industry sectors will not allow somebody to enter a Trust Deed in Scotland or Bankruptcy and continue to work at their current job.

These days even many bank employees are able to enter a Trust Deed, however to be sure you should check your employment contract and even consider speaking to your Human Resources department if you are unsure.

When you enter a Protected Trust Deed in Scotland you agree to repay what you can reasonably afford each month, usually for a 3 year period.

Each year an income and expenditure will be completed to check your financial situation and to enable your Trustee to report back to the creditors on your case. If your Trustee believes your financial situation has changed for the better (e.g increased wages) then you will be asked to contribute more each month to your Trust Deed. Similarly, if you have less available money to pay towards your Trust Deed each month (e.g. cost of living has risen- petrol, electricity, food etc - has increased) then you will be asked to pay less towards your Trust Deed on a monthly basis.

There are lots of TV adverts offering people a Protected Trust Deed Scotland. Often they are very general and don't explain the benefits and negatives of a Trust Deed in Scotland.

As a registered charity our obligation is to provide you with the complete range of debt advice and ensure you're aware what debt solutions are suited to your personal and financial situation. We don't advertise Protected Trust Deeds in Scotland on TV however we can advise you of your options, you will then have the information you require to make an informed decision.

If you have watched one of the many TV adverts for a Protected Trust Deed and would like debt help you can call Debt Support Trust on 0800 085 0226.