Protected Trust Deeds Are Changing
10th September 2013
Changes to the way protected trust deeds work in Scotland are to go before the Scottish Parliament shortly. It’s expected that by the end of November 2013 there will be several significant changes put in place.
The Scottish Government believes that these changes will reduce the costs currently inherent in the trust deeds process, that the changes will deter those will less serious debt problems from applying, and will overall result in creditors receiving enhanced returns.
Increased dividends for creditors can be produced in two ways; firstly by reducing the fees charged by insolvency practitioners to administer Scottish trust deeds and secondly by increasing the amount that debtors will have to pay. Both of these areas have been targeted in the new legislation.
Currently the minimum term of a protected trust deed is three years. This is expected to increase to a minimum term of four years in the future. A client contributing £250 per month would typically contribute a total of £9000 currently (36 months) but this will rise to £12000 in the future (48 months). The contribution term for sequestration (bankruptcy) is also expected to be extended to 48 months in the future though this may not occur until 2015.
The fees charged by the trustee may be more closely controlled and aligned with the interests of creditors. They’ll charge a single agreed upfront fee at the start and then be paid a percentage of the amount of money that they collect from their client during the arrangement. They will no longer be able to pass on the cost of employing fact-finding agents (often used at the start of the trust deed process) to the creditors. Such payments will effectively need to be funded by sharing their own fees in the future. This is likely to curtail the current activities of some trust deeds introducers.
The collection abilities of the trustee will be enhanced by being able to seek payment direct from an employer if their client misses two consecutive payments. While it’s hoped that this will only be used in extreme circumstances, it’s clear that a client that is in dispute with their trustee will be placed in a significantly weaker position by this change.
A minimum debt level of £5000 is to be imposed. There will be also be no access to protected trust deeds for anyone that has the ability to fully repay their debts at their deemed affordable level of contribution (the amount that would be paid into a trust deed) over a four year period or less. The Debt Arrangement Scheme is an obvious solution in such circumstances.
We’re aware that many Trust-Deed.co.uk visitors read our debt advice forum for months (sometimes even years) before making a decision to seek advice and implement a debt solution. Any current visitors that consider that they are likely to enter into a Scottish trust deed in the future might be well advised to get advice very soon. Delaying this process for much longer might result in them entering an arrangement that lasts longer than it otherwise needs to.
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