Redundancy During A Trust Deed In Scotland

19th December 2012

This week we learned that the UK Government is to reduce the consultation period for large redundancy programs from ninety days to forty-five days. Union representatives have criticised this change as diminishing the prospects for negotiated outcomes that benefit employees as well as employers. The business community has welcomed the change which they feel will provide greater flexibility when businesses get into trouble.

Redundancy is often a nightmare for those that personally stand to lose their job. The issues posed by being made redundant can be even more worrying for those that are recovering from serious debt problems using options such as a protected trust deed or the debt arrangement scheme in Scotland. In this article we review what will happen if you are made redundant during your trust deed.

It’s important to state from the outset that suffering redundancy during Scottish trust deeds does not mean that the arrangement will automatically fail. It also does not automatically mean that every redundancy settlement will have to be paid over in full to your trustee. Indeed, for some people, being made redundant might even open up possibilities for an unexpected positive outcome.

What will happen to a redundancy payment? You are likely to be able to keep the “statutory” element of any redundancy settlement. This is the amount of money that your employer has to pay you by law. For most people this will provide a financial cushion that will allow them to pay their bills, expenses and trust deed payment while they look for new work.

Any extra payment connected to a redundancy may have to be paid into a Scottish trust deed. This extra might be paid because your contract entitles you to it, it was negotiated by you or your union, or because your employer chose to offer favourable redundancy terms. You are expected to inform your trustee promptly of any such payment in order that they can instruct you how to proceed. Where it is paid into your trust deed your creditors will expect to receive a higher proportion of what is owed to them than was originally envisaged.

What would happen if you receive only a small redundancy payment which runs out before you have found new work? In such circumstances you must maintain good lines of communication with your trust deed provider. It’s highly likely that they’ll allow you a temporary payment break while you find new work. They are very unlikely to want to see your trust deed fail while a prospect of saving it remains. However, they can only help if you keep them informed about what is going on.

How is it possible that redundancy might offer a positive outcome? If you are approaching the end of your trust deed it might be possible to negotiate an early discharge. For example, you may be able to offer a sum equivalent to your remaining payments due (from the statutory element of a redundancy payment) that your trustee will accept to end the arrangement. If your redundancy payment is very large it may be sufficient to end your trust deed if it means the debts, interest and trustee fees have all been fully covered. This would also lead to an early discharge.

Few people will welcome being made redundant at any time, let alone midway through a protected trust deed. However, it will often not turn out to be the disaster that is initially feared. Systems and processes exist that will help most people to work through this unfortunate turn of events.  

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