A Trust Deed in Scotland could be the ideal remedy for the debt that feels like it’s taking over your life. It’s a formal but voluntary arrangement that enables you to be the one in control again - even if right now it feels like that’s impossible. You pay back the amount it’s calculated you can manage in a realistic timescale.
In simple terms, Scottish trust deeds are a compromise between a debtor (who cannot afford to fully repay their debts) and his or her creditors (who would like to recover at least some of the money owed to them). It is an alternative to bankruptcy.
This is a formal personal insolvency procedure. The arrangement therefore has legal standing. This means that a specially qualified and regulated person (known as an “insolvency practitioner” or “IP”) must be appointed in order to enter into trust deeds in Scotland. The insolvency practitioner is generally referred to as the “trustee” once the arrangement has begun.
The trustee does not generally handle all of this work on their own. They employ teams of people to assist with the provision of debt advice, the handling of their essential casework, and hopefully the delivery of good customer service. Insolvency practitioners who personally take on such appointments tend to be based within insolvency practices, at general accountancy firms, or as part of specialist debt solution providers.
Please note that the “what is a trust deed?” pages on some other websites seek to emphasise the advantages of these debt deals against some of the potential disadvantages. There’s a section about some possible disadvantages towards the bottom of this article which can help you to make a more educated and informed decision.
Once trust deeds become protected, your unsecured creditors (owners of the debts that existed on the date that you signed the formal agreement) will no longer be able to use legal recovery procedures to collect these debts from you.
To achieve protected status, some of your personal details are initially added to the “Register of Insolvencies”. This is a public register that will continue to be updated as your case progresses. At this stage, this register serves the purpose of alerting any creditors that have not been written to by your trustee that you have signed a trust deed. Please note that your personal details will be removed from the public Register of Insolvencies one year after your trustee has been discharged. Trustee discharge is likely to occur some months after you have personally been discharged.
Five weeks after your case detail was formally registered, your arrangement will typically become a protected trust deed. This may not be the case if a significant number of your creditors object to protection, or if a major creditor (or combination of creditors) chooses to object.
The first important part of the process is to take debt advice from a suitably qualified adviser. This is because trust deeds Scotland aren’t the only way to tackle problem debts. Some people who live in Scotland would be much better-advised to use other Scottish debt solutions to tackle their unaffordable debts.
Sadly, there’s no shortage of poor-quality unqualified debt management advice on offer. There’s also no shortage of evidence in our trust deed forum that some unethical debt advisers point their clients towards the solution that happens to be the most profitable for their employer.
The good news is that there are plenty of qualified and professional debt and personal insolvency advisers. A careful choice is however required from you to make sure you find them.
If you are advised that a Scottish trust deed suits your circumstances and needs, and you agree with this advice, the next stage is to find a high-quality trust deeds Scotland provider to handle this process for you. Once again a careful choice is required; the customer-feedback on the various providers (in our online forum) varies widely from “outstanding” to “appalling”!
The company that you choose will confirm your financial circumstances with you, collect the necessary details from you, and later present you with the official (binding) documentation. Once you sign this formal documentation you will become legally committed. It therefore makes sense to ensure (in advance) that you are fully aware of exactly how important things like extra earned income, your vehicle, or your home might be affected.
Your trustee will present your repayment proposals to your creditors. Provided that there is no significant opposition to your proposals from your creditors, your arrangement will normally become protected five weeks later.
It is up to each creditor to choose whether or not they will agree to your proposals. They typically make their acceptance criteria clear to insolvency practitioner firms in advance, so your trustee should be able to inform you in advance whether your case meets these acceptance criteria or not.
Our site’s debt advice team (who are all professionally qualified debt advisers) are often asked by enquirers why creditors tend to accept protected trust deeds. Why would a lender be prepared to voluntarily write off a percentage of the money owed to them?
The starting point is that a trust deed in Scotland can be a highly effective debt solution. They are used with success by thousands of people all around Scotland each year. Despite the many merits, they should however always be viewed as a last resort - an alternative to bankruptcy when problems with debt have become very serious.
Creditors tend to look at trust deeds in Scotland in these terms. Is the proposed arrangement a better deal for them commercially than your bankruptcy would be? Creditors effectively make commercial decisions as to whether a proposed formal debt compromise offers them the best prospect of making a recovery of at least some of the money which is owed to them.
Where a debt problem is serious, and a trust deed is structured in a fair and reasonable way, these arrangements tend to offer them a better return on the debts than they would have received from a bankruptcy. If bankruptcy appears to be the only real alternative solution, it’s often in the commercial best interests of a lender to support a proposed arrangement in becoming protected.
Insolvency firms and creditors communicate about the acceptance criteria which are in force at any particular point in time. Good insolvency practitioners therefore broadly understand what the main lenders (banks, credit card providers, catalogues) will expect from a proposal in order to provide their consent to it becoming protected. Clients of these experienced firms can typically therefore be reassured that their arrangements are highly likely to become protected, even if no total guarantee can ever be provided.
Your trustee will be responsible for issuing any payments that become due to your creditors via a protected trust deed in Scotland. Interim dividends may be paid to your creditors during the arrangement, with the final sums due being paid around the time that you and your trustee are discharged.
Any Scottish resident entering into trust deeds in Scotland should clarify carefully with their licenced insolvency practitioner (the “trustee”) whether there might be any implications for their home, their car, or any other significant assets that they own. Home and car owners (for example) may in certain circumstances be required to release equity from these assets to help repay more towards their debts as an integral part of their trust deed proposal.
Please note that when you cease making payments directly to your creditors there is a likelihood of falling into arrears or further into arrears.
If it is possible to obtain an increased mortgage (or an extra secured loan) during a protected trust deed in Scotland, homeowners with equity may well be required to do so in order to release further money to help repay their creditors. A mortgage obtained during while personally insolvent is likely to be on less favourable terms than might otherwise be achieved (for example the interest rates may well be higher). If a homeowner with equity is unable to re-mortgage as requested, and the money cannot be raised by any other means, their home may become at risk of being sold to release the equity.
Your expenditure during the agreement will be restricted. This is in order that you can pay what you can reasonably afford towards your debts (as determined by your trustee). Only unsecured debts that existed when your formal proposal was originally signed will be written off at the end of the process. If your trust deed fails you may, in some circumstances, be made bankrupt by your trustee.
Your personal details will be recorded on the Register of Insolvencies, a statutory register administered by the Accountant in Bankruptcy.
A trust deed in Scotland will have a very significant effect on a credit record which is likely to be similar in effect to bankruptcy. Any previous Scottish trust deeds may also need to be declared on some firm’s mortgage applications after they have been completed, even if they’re no longer recorded on your credit record.
A trust deed isn’t just about paying back what you owe. It’s about getting your life back. Simply fill out the below form and we’ll be in touch to explain exactly how you can do that. If you’d rather speak to one of our advisors over the phone right now, call 0141 249 0416 or 0800 043 7201.
[Or, if you have any questions that weren’t answered here, you can take a look at our forum which is full of information and advice.]