A Trust Deed is a Scottish debt solution that enables you to pay one affordable monthly payment towards all of your unsecured debts, typically for 48 months (4 years). Once approved, you would stop paying your creditors and make one monthly payment to your debt. You would repay what is affordable throughout the 48 months and any debt which is not repaid would be legally written off.
This legally binding agreement between yourself and your creditors offers you protection so your creditors are no longer allowed to request payment. If you enter the solution then fees and interest is included too. In return, the creditors will receive a fair and affordable percentage of their money back.
If you’re struggling to pay your debt back, live in Scotland and can contribute to a set monthly payment towards your debt, then a Protected Trust Deed could be suitable for you.
A regulated debt adviser can help you understand if you would qualify for this Scottish debt solution, which can help you become debt free. It’s important you seek debt advice before entering the debt solution to ensure it’s the right option for you.
Speak to a money adviser at one of these charities for support:
StepChange: 0800 138 1111
Debt Advice Foundation: 0800 043 40 50
Citizens Advice Bureau: 0808 223 1133
National Debtline: 0808 808 4000
What Is A Trust Deed?
If you need assistance with money problems then there could be multiple options and various routes to resolve the issues.
You may need to open a new bank account, with a company you don’t owe money to, regardless of which debt solution you enter. If you don’t owe money to the company you bank with, and don’t have an overdraft with the bank, then you may be able to retain your bank account.
A proposal is sent to your creditors so your insolvency practitioner will need to see some paperwork which will also ensure you’re still suitable for your chosen debt solution. The proposal outlines how much you can afford to repay and what the creditors will receive. The insolvency practitioner fees typically come from the monthly repayments, then whatever is left is distributed to each creditor on a pro-rata basis.
Once your proposal is signed your Trust Deed is advertised on the Register of Insolvencies, after which time, your creditors have 5 weeks to accept or object to the proposal. If creditors don’t vote then they are deemed to have accepted the proposal. If enough creditors reject the proposal then your application would not proceed and we would assess other options to repay your debts. If we thought your proposal would not be accepted, for whatever reason, we would inform you before proceeding to the proposal stage.
Once your proposal is accepted then your plan becomes “protected”. Your creditors can no longer take action against you to recover the money they are owed. You would stop making repayments to your debts and instead make one affordable monthly payment to the solution. Each year your income and expenditure will be re-assessed to ensure you’re paying an affordable amount.
Once all payments have been made and equity from assets realised for your creditors, then you would be discharged and any remaining debt would be legally written off, along with interest and fees. You will receive a certificate to confirm you have been discharged and are no longer subject to the solution rules.
Benefits of a Trust Deed
- You only make one monthly payment to your debt and only pay what you can reasonably afford.
- Your interest and charges will be frozen and you can take control of your finances once again.
- You will not have to liaise with your creditors as this is done on your behalf.
- Once the solution is signed and protected, both you and your creditors are legally bound by the agreement, which means should you complete the Trust Deed, you will be debt free having repaid what you can reasonably afford each month. Any debt not repaid will be legally written off.
- If you are a homeowner you may be able to retain your property, the insolvency practitioner will only be interested in any available equity
- There are no upfront fees and typically any fees for the debt solution are taken from your monthly repayments. This means there’s no hidden costs.
- You will regain control of your finances and can plan for a future where you will be debt free
Negatives of a Protected Trust Deed
- If there is any available equity within your property this will have to be included in your proposal.
- If you are able to repay all of your debt in the future (for example, you receive a cash windfall, inheritance or win the lottery) then you would be expected to do so. If your cash windfall is greater than the amount of debt and fees, then you would retain the remaining balance.
- Your employment contract may not allow you to enter some Scottish debt solutions – you would need to check this with your HR department/ employer.
- If you enter the debt solution and do not meet the terms of the agreement you may be sequestrated.
- Your income and expenditure will be reviewed regularly and your monthly payments may fluctuate up as well as down.
- The default applied to your credit file will be listed on your credit report for six years.
How to qualify?
It’s important that anyone entering a Trust Deed is suitable for the solution and is given appropriate advice.
To be accepted you must:
- Reside in Scotland.
- Be unable to pay your debts as they fall due each month. You must not be able to repay your debts in 48 months or less.
- Be able to make a monthly contribution to your debts. If your income is solely reliant on state benefits (universal credits, for instance) then a Trust Deed would not be the best option. If you have non-benefit income as well as state benefits then you could qualify, but your monthly payments must not exceed your non-benefit income.
- Your unsecured debt must be £5,000 or over. The £5,000 threshold for unsecured debt is per person. If your partner also has debts and wishes to enter the solution then you each must have £5,000.
- Not have been made, or voluntarily entered bankruptcy in the past 5 year.