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. The solution usually lasts for 4 years however it can be longer or shorter depending on circumstances.

If you meet the criteria and wish to proceed then an insolvency practitioner is required to administer your case. A proposal will be sent to your creditors for them to accept, reject or modify.

As long as one third in value (or more) or a majority in number of creditors don’t object to your proposal then the solution will be accepted.

Usually it takes at least 6 weeks to be set up, however it can 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.

If you have the necessary documentation then it can be a relatively quick process.

Typically, your plan will last for 4 years, however in some instances this can be extended. You must repay at least 10% of the debt (after fees have been taken) so in some instances your solution may be extended to help achieve the necessary return to creditors.

Your creditors have the right to reject your proposal. However, it’s unlikely your proposal will be drafted and sent to your creditors if we do not think your creditors will accept it.

When you put a Trust Deed proposal to your creditors you are acknowledging that you have a debt problem and will not realistically be able to repay the money borrowed. Your creditors will often only get back a proportion of the money they lent you.

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. 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.

An expression widely used in advertising is to “write off debt”. You cannot simply write off your debt, however if you are suitable you repay what you can afford. Any outstanding debt left at the end of the solution will be cleared/ written off.

Most people entering the solution will not repay all of their debt, so will often write off a percentage of the debt, along with fees and interest.

After your proposal is signed and protected you cannot change your Trustee.

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.

There are some differences between a debt management plan 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 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.

If your property has negative equity then there is no available money to release and you will be able to retain your property and enter the solution. If your property has equity at the end of the solution you will be required to release this money.

A common question is whether an employer can stop a person entering a debt solution. To determine whether this applies to you it’s important you check your terms of employment contract. Some industry sectors will not allow somebody to enter the solution (or Bankruptcy) and continue to work in their current role.

You should check your employment contract and even consider speaking to your Human Resources department if you are unsure.

When you enter this debt solution 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 could be asked to contribute more each month to your proposal. Similarly, if you have less available money to pay towards your solution 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.

A Trustee is required to setup and administer your debt solution. The Trustee will be a licensed insolvency practitioner. The debt solution will have fees and charges attached. The fees and charges 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.

No, in England, Wales and Northern Ireland there’s a similar debt solution called an Individual Voluntary Arrangement (IVA).

You will need to owe £5,000 or more in unsecured debt to enter the solution, however it also depends on your available disposable income. Other debt solutions may also be applicable, which is why it’s important to receive advice.

The answer to this question varies for each person, because it will depend on your income, affordability and what you can reasonably afford each month towards your debt.

Yes, it is important that you are open and honest about all income and assets. This is to ensure at all times you are getting the best advice.

If you’re worried about your information then speak to a debt adviser first so we can assess your circumstances and empower you to make an informed decision.

Your details will be entered on the Register of Insolvencies which is maintained by the Accountant in Bankruptcy. Unless you tell them it would be unlikely they would check the Register, however it is a publicly accessible database.

Once you enter the solution a wages arrestment will normally be lifted.

If there are joint debts then the other person becomes liable for the full amount.

It is inappropriate to gather any more debt, as there is no allowance given in your income and expenditure for any repayments to new debt.

Yes, however if you are struggling with rent it is worthwhile talking to us as soon as possible so we can work out what, if any, arrangement you have with your landlord.

No, student loans must be repaid, they cannot go into any debt solution.

No, you will not need to go to court or meet with your creditors.

Disclosure Scotland only checks criminal history so no, it wouldn’t show up. It would show up on a financial credit check.

It all depends on the type of finance your car is on. If it is Hire purchase or PCP agreement then you should continue to make payments as the finance is secured against the vehicle. If it is a fixed sum loan agreement then this debt would be involved in the solution.

If the value of your car is below £3,000 then yes, you can keep the vehicle. If it is worth more and you need it for work then you will also be able to keep it. If at the end of your solution it is worth more than £3,000 your payment period could be extended.

If you were unable to pay your monthly contribution then you would need to discuss the situation with your IP and they would look at the options available to you. Payment holidays are permitted however if your income is likely to be impacted for the longer term then you may be more suited to another solution.

Once you have paid all contributions and complied with the terms of the agreement you will be discharged from all debt incurred before you signed the agreement. You should receive a form confirming you’re discharge.

The creditors should no longer contact you, though if they do you should tell them you have entered a debt solution and give them the details of the insolvency practitioner (IP).

No, your partner should not be impacted as it’s an individual agreement, solely with yourself. The only reason it could impact on your partner would be if you had joint debt or own a property together. We always advise where possible you should tell your partner.

No, however you should disclose it so you are given the correct advice, depending on your age etc.

Once your Trust Deed becomes protected, the creditors can take no further action against you because they are legally bound by the terms of the agreement.

As long as the cost isn’t excessive it will be taken into account with your expenditure. You should check the terms of your HP agreement.