What is a Trust Deed?

A Trust Deed is a voluntary agreement between a debtor and their creditors (the people they owe money to) to repay part of what they owe.

The Trust Deed is put together and managed by a Trustee who must be a qualified insolvency practitioner. When handling Trust Deeds the insolvency practitioner is regulated both by law and their regulating professional body.

What is a Protected Trust Deed?

To become binding on all creditors, a Trust Deed in Scotland must become “protected”. This is achieved around five weeks after a Trust Deed has been signed provided a significant number of creditors (or a single creditor owed a significant amount of money) does not object to the arrangement. Once your Trust Deed becomes protected, creditors can take no further action to recover the money that was owed or take legal action in Scotland against the debtor.

Things to consider with a Trust Deed...

A Protected Trust Deed will generally last for three years.

Any new debts taken on after entering a Protected Trust Deed would not be protected against in the same way.

You can choose which Trustee to use (a Trustee is the Insolvency Practitioner at the firm you choose who is responsible for your case). Trustees are expected to provide advice on alternatives to a Trust Deed. The reason for this is that entering into a Trust Deed in Scotland is a serious step to take and has consequences that the individual considering this course of action must take into account when making their decision to proceed.

Individuals in certain types of profession may not be able to enter into a Trust Deed without jeopardising their professional status. The firm handling your Trust Deed should make you aware if this might be a risk to you. People who are concerned about this may wish to check their contracts of employment, speak to their HR department or Trade Union, or consult with their professional body if they have one.

A Trust Deed tends to be accepted by creditors where no realistic alternative exists and where they consider that the debtor is doing their reasonable best to repay what they can realistically afford via the Trust Deed.

As part of entering into a Trust Deed your Trustee will take control of any significant assets that you own. Most typically this will refer to your home. If there is equity in your home this will need to be realised at some point during the Trust Deed. You should seek written clarification as to how this could be achieved from your Trustee prior to signing the Trust Deed.

Other assets (such as a vehicle) may also be included in some way in a Protected Trust Deed. Once again we recommend that you insist on receiving a written record of how this will be dealt with before signing a Trust Deed.

Visitors are encouraged to choose their Trust Deed firms very carefully. Feedback in our forum would indicate that quality can vary from firm to firm throughout Scotland.

Should you have questions about a Protected Trust Deed in Scotland please visit the forum or contact the support team on 0800 043 7201 or via the Contact Us form.

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