Protected Trust Deed

 

A Protected Trust Deed is a debt solution for people living in Scotland and is an alternative to Sequestration. The Scottish Trust Deed helps people manage their debt and pay one affordable payment each month, until the solution is finished.

Our charity debt advice team can help you understand if you would qualify for this Scotland-only debt solution.

Please call 0800 085 0226 or complete our debt analyser below for immediate assistance.

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Protected Trust Deed Scotland

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A Protected Trust Deed (Scotland) is a legally binding solution. A proposal is put to your creditors on your behalf by a licensed insolvency practitioner (IP). The proposal is an agreement by you to make an affordable monthly payment towards your debt for typically 4 years. In return you will only repay what you can afford. Any remaining debt will be cleared at the end of the solution, as long as you comply with the terms and conditions of the debt solution.

Any remaining debt after the debt plan has concluded will be cleared and you will be debt free. This relates to unsecured debt only. You will need to maintain payments to any secured debts, such as a mortgage. Click here for further information on debt advice in Scotland.

Get Help With A Scottish Trust Deed

You can get immediate help from a debt advice charity by telephoning 0800 085 0226. Alternatively, complete our debt analyser form and request a call back for immediate debt help.

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Benefits of a Trust Deed Scotland

  1. You only make one monthly payment to your debt
  2. Your interest and charges will be frozen. However if your Protected Trust Deed Scotland fails at any stage, or you receive a windfall (such as winning the lottery etc), you will be required to repay interest and charges too
  3. You will not have to liaise with your creditors as the insolvency company will do this on your behalf
  4. Once the solution is signed and protected both you and your creditors are legally bound by the agreement, which means if you complete the agreement you will be debt free having only repaid a proportion of the money borrowed
  5. If you are a homeowner you may be able to retain your property, the IP will only be interested in any available equity
  6. In the future you are likely to face fewer credit restrictions than if you entered Sequestration

Negatives of a Protected Trust Deed Scotland

  1. If there is any available equity within your property this may have to be included in your proposal
  2. The debt solution may adversely affect your credit rating
  3. Your employment contract may not allow you to enter a Trust Deed - you would need to check this
  4. If you enter the debt solution and do not meet the terms of the agreement you are likely to face Sequestration
  5. Your income and expenditure will be reviewed regularly and your monthly payments may fluctuate up as well as down
  6. A remortgage is likely to be on less favourable terms and if you are unable to gain a remortgage your debt solution may be extended for up to 12 months
  7. The default applied will affect your credit rating for six years

Criteria for a Trust Deed Scotland

- Must be able to make a monthly contribution to your debts of at least £50

- Your unsecured debt must be £5,000 or over

- You must be able to repay at least 10% of the money borrowed over the course of the solution to your creditors

Fees associated with a Trust Deed in Scotland

A Trustee is required to setup and administer yourdebt solution. The Trustee will be a licensed insolvency practitioner. The debt solution will have fees and charges attached. The fees and charges for your Trust Deed will be made from the money you pay into your debt solution each month. The fees cover

  1. Drafting and administrating the proposal
  2. Corresponding with your creditors
  3. Ensuring your monthly contributions are distributed to your creditors and any other assets are dealt with
  4. Periodic reporting to creditors and the Accountant in Bankruptcy
  5. Dealing with any other issues or concerns during the course of the Scottish debt solution.

Different insolvency companies will charge varying levels of fees depending on their company policy and the complexity of your case. There will be a nominee fee to propose your case then a supervisory fee for managing your case through to the end.

If your debt solution were to fail you would be liable for repayment to your creditors. You may also face Sequestration.

FAQ

    What is a Protected Trust Deed?

    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 4 years however it can be longer or shorter depending on circumstances.

    It is an alternative to Sequestration.

    What is the process?

    If you meet the criteria for a Scottish Trust Deed and wish to proceed then an insolvency practitioner is required to administer your case. The stages to enter the solution 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. You debt solution 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.

    How long does it take to set up?

    A Trust Deed will take at least 6 weeks to be set up, however it's likely to be longer. The time taken to establish the debt solution 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.

    How long will I be in the debt solution?

    Typically your plan will last for 4 years, however in some instances this can be extended to make the minimum repayment to creditors. It can also be shorter if you're entering an asset / equity only version.

    Is a Trust Deed proposal always accepted by creditors?

    Your creditors have the right to reject your 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 Scottish Trust Deed is suitable for you then a Debt Support Trust debt advisor will fully advise you on the process.

    Why would my creditors accept my proposal?

    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.

    What will happen to my home and car?

    Usually an insolvency practitioner will only be interested in the available equity in your house. Your proposal will aim 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.

    Does that mean I can write off my debt?

    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 Trust Deed you repay what you can afford. Any outstanding debt left at the end of the term of a will be cleared. 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 the debt solution as this breaches the terms of your agreement.

    What's the difference between with Protection in a Trust Deed?

    A Trust Deed gains protection and becomes a 'Protected' after the creditors accept your proposal.

    Can I change my Trustee in the debt solution?

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

    Would my PPI claim have to be included within my debt solution?

    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 the debt solution must be realised and any available equity should be included within your proposal.

    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 Scottish debt solution.

    If I inherit money whilst in a Trust Deed, what happens?

    If you come into money whilst in the debt solution 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.

    I've been on a Debt Management Plan, how is this different?

    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 Scottish 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 debt solution will usually last for 4 years. You cannot start and stop the debt solution like the Debt Management Plan and if you fail to meet your contractual agreement your Trustee may decide to proceed with Bankruptcy.

    Our property has negative equity, can we enter a trust deed?

    Our property has negative equity so can we still enter the debt solution 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 Scottish debt solution. 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.

    Will my employers allow me to enter a Scottish Trust Deed?

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

    These days even many bank employees can resolve their debts with this debt solution, however to be sure you should check your employment contract and even consider speaking to your Human Resources department if you are unsure.

    My monthly Trust Deed payments are going up / down, why?

    When you enter this debt solution in Scotland you agree to repay what you can reasonably afford each month, often for a 4 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 proposal. 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 money on a monthly basis.

    Protected Trust Deed Scotland TV Advert

    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 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 Scottish debt solutions and would like debt help you can call Debt Support Trust on 0800 085 0226.

 
 

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