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.

Trust Deed

Benefits of a Trust Deed

  1. You only make one monthly payment to your debt and only pay what you can reasonably afford.
  2. Your interest and charges will be frozen and you can take control of your finances once again.
  3. You will not have to liaise with your creditors as this is done on your behalf.
  4. 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.
  5. If you are a homeowner you may be able to retain your property, the insolvency practitioner will only be interested in any available equity
  6. 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.
  7. 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

  1. If there is any available equity within your property this will have to be included in your proposal.
  2. 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.
  3. Your employment contract may not allow you to enter some Scottish debt solutions – you would need to check this with your HR department/ employer.
  4. If you enter the debt solution and do not meet the terms of the agreement you may be sequestrated.
  5. Your income and expenditure will be reviewed regularly and your monthly payments may fluctuate up as well as down.
  6. 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.
Can You Explain What A Trust Deed Is?

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.

What Is The Process?

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.

How Long Does It Take To Set Up?

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.

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. 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.

Is The Proposal Always Accepted By 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.

Why Would My Creditors Accept My Proposal?

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.

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.

Does That Mean I Can Write Off My Debt?

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.

Can I Change My Trustee In The Debt Solution?

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

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 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.

Our Property Has Negative Equity, Can We Enter The Solution?

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.

Will My Employer Allow Me To Enter A Scottish Trust Deed?

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.

My Monthly Payments Are Going Up / Down, Why?

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.

What's The Cost?

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.

Can I Get A Protected Trust Deed in England, Wales, N. Ireland?

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

How Much Do I Need To Owe To Enter The Solution?

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.

How Much Will I Need To Pay Each Month Towards The Solution?

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.

Do I Have To Tell My IP About All My Income?

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.

Will My Friends And Family Know About My Debts?

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.

The Council Have Arrested My Wages, What Will Happen?

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

Some Of My Debt Is Joint With My Ex, Will He Still Be Liable For Half?

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

Will I Still Be Able To Get Credit When I Am In The Trust Deed?

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.

Can My Rent Arrears Be Involved Too?

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.

Can My Student Loan Be Included?

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

Do I Need To Go To Court At Any Point?

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

I Work With Children, Will A Debt Solution Show Up On My Disclosure Scotland Check?

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

My Car Is On Finance, Will I Have To Keep Paying It?

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.

Will I Be Able To Keep My Car?

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.

What Happens If I Am To Ill To Work?

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.

When I've Made All My Payments What Happens?

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.

Once My Trust Deed Has Been Signed What Do I Tell My Creditors?

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).

If I Enter a Debt Solution Will My Partner Be Affected?

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.

Will My Pension Be Affected?

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

Why Does It Matter That It's A Protected Trust Deed?

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.

My Sofa Is On HP Will I Still Be Able To Pay It?

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.