Trust Deed

A trust deed could make your debts affordable again, and write off the unsecured debt you can't afford after three years. You'll also be protected against further action from your lenders. A trust deed is an agreement with your lenders that could help you if you don't think you can afford to repay everything you owe. You agree to repay as much as you can towards your unsecured debts - normally for four years - and at the end of that time, any remaining unsecured debt is written off. During your trust deed, you'll also be protected against further action from lenders included in the agreement - so they won't be able to make you bankrupt or demand higher payments.

What is a Protected Trust Deed?

If a trust deed becomes 'protected' if you receive approval from more than half of your lenders, or those accounting for at least one third of your total debt). A protected trust deed is legally binding, meaning your lenders can't change their minds or take any further action against you. At the same time, you are legally obliged to keep up with your payments.

In theory, a trust deed can go ahead without being protected, but it's unlikely you'd be able to do this without your lenders trying to take alternative action. For this reason, all our trust deeds are protected.

Advantages Summary

Reduce Hassle from creditors

Those unsecured creditors who agreed to the terms of your Scottish trust deed must alone once it is protected. Your Trustee will deal with all contact from your unsecured creditors, distributing your payments among them according to the terms agreed in your Scottish Trust Deed.

Interest and charges

All charges and interest arising from your unsecured debts within the Scottish Trust generally not applied as long as you abide by the repayment plan. If your trust deed is protected, even those unsecured creditors who object to the Scottish trust deed cannot instigate any proceedings against you either.

Financial stability in 48 months*

Your Scottish trust deed normally lasts for only four years, unlike normal debt that can feel like a permanent heavy weight on your shoulders for years on end. With a Scottish trust deed you know after four years that you will be discharged from the remainder of your debt and you can start again with a clean slate.

Only your disposable income will be used to pay creditors

While luxuries like gym memberships and holidays will not be allowed, your living expenses such as your rent or mortgage, bills, food and work-related travel costs will take priority in your Scottish trust deed budget. Your expenditure is assessed against agreed guidelines called the Common Financial Statement and our advisers will help explain what you can and cannot include in your budget. Your Trustee will reassess your income and expenditure at least once every year.

Able to negotiate

You may be able to negotiate to keep your home rather than sell it. This is a major fear of many people facing sequestration. Being made to sell a beloved family home and move to rented accommodation can be immensely upsetting. A Scottish trust deed can help prevent this from happening.

If you're a business, carry on trading

If you own a company or are a sole trader, you can still carry on trading, although you may need special permission from the company if you are a director . You may even be able to obtain very small amounts of credit, unless the terms of your Scottish trust deed say that you cannot.

Disadvantages Summary

It will affect your credit rating

A Scottish trust deed will affect your credit rating. There is unfortunately no way to avoid this, although it is likely your credit record is already being affected if you have missed payments on your debts.

You may have to sell or remortgage

Granting a trust deed could mean that your house may be sold and you might have to move home, unless it is excluded under the legislation or you can make alternative arrangements. The exclusion terms are quite complicated and are set out in section 2.8 of the Accountant in Bankruptcy’s trust deed Guidance, but they generally apply only to your main residence if it has little or no equity. However, even if your property is not excluded you may be able to agree to make additional payments into your trust deed in lieu of the equity or arrange for a remortgage or third party contribution, so you have several options to avoid having to sell. You will not be expected to sell basic household items such as your TV and computer and you can keep your car if you need it for work and family purposes. The only exception to this is if the car is high value and you may be expected to downsize to something less expensive. If you pay into a pension, you may be required to reduce your payments or stop making payments until the Scottish trust deed is complete.

Only unsecured debts are covered

Only unsecured debts are covered by a Scottish trust deed, so any loans secured on your home or through hire purchase agreements are not covered.

It will be advertisied in the local press, but only could be found if someone knows look

When you grant your Scottish trust deed, it will be recorded on the Register of Insolvencies, which is a public record. Theoretically your friends, family or work colleagues may find out. However, it is highly unlikely they would unless they were specifically looking for the information.

Dont miss a payment!

If you fail to make a payment under your Scottish trust deed agreement without first contacting your Trustee for discussion and permission, you may find the trust deed fails and your unsecured creditors are entitled to pursue you for sequestration. It is sometimes possible to arrange payment holidays or to extend the timeframe of the Scottish trust deed in exceptional circumstances, so it’s important you let your Trustee know as soon as you think you might not be able to make a payment.

Don't take out more debt!

If you run up any new debts in addition to those within your agreement, your new creditors will be able to pursue you for your new debts. Your existing Scottish trust deed does not cover debts incurred outside of the agreement. This is why it is extremely important for you to declare all of your debts to your Trustee at the beginning.

Will My Lenders Agree to a Trust Deed?

They are likely to agree as long as you genuinely can't afford to repay your debts in full, although we can't guarantee it. We always do our best to show lenders why a trust deed is the best option for everyone involved.

Not all your lenders have to agree to a trust deed. A trust deed involving all your lenders will go ahead as long as at least 50%, or those accounting for 33% of your total unsecured debt, agree. They may be more likely to agree if you are a homeowner.

This is because homeowners on a trust deed are normally expected to release some of the money they've put into their home (their 'equity'), which helps to repay more of the debt. However, you won't be expected to sell your home, like you could if you go bankrupt.

How Long Does a Trust Deed Last?

Most trust deeds last four years. However, in some cases your trust deed could be longer or shorter than this, depending on how things pan out.

For example, if you receive a large sum of money during your trust deed, you may be able to end it early by paying a final lump sum. Or if you have to take a break in your payments for any reason, your trust deed will normally be extended by the same amount of time. (Bear in mind that if you fail to complete your trust deed, it could lead to bankruptcy.)

And if you aren't a homeowner or can't release equity for any reason, the trust deed could be extended past the usual four years to help you repay more of your debt.

Who Can Apply for a Trust Deed?

You may qualify for a trust deed if you meet the following criteria:

  • You are based in Scotland.
  • You have unsecured debts that total more than £6,000 that you can't afford to repay in full within a reasonable period of time.
  • You can still afford to make regular monthly payments towards your debts - but these will be reduced so that they fit alongside your other essential living costs.

The Trust Deed Process

Before your trust deed can start, an Insolvency Practitioners will put together a trust deed proposal. This tells your lenders why a trust deed is the best option for everyone involved, and shows your lenders how your trust deed will work (e.g. how much you can afford to pay each month).

This must receive approval from at least 50% of your lenders (or those owed at least one third of your total unsecured debt). If this happens, all other unsecured lenders will be included in the agreement, regardless of how they voted. In reality, as long as you genuinely can't afford to repay what you owe, they are likely to agree.

From there, your usual unsecured debt repayments will be replaced with one affordable monthly payment. From this, the agreed amounts will be passed on to each of your lenders.

If you're a homeowner, some of the money you've put into your home (your 'equity') may be released towards the end of the agreement to help repay your debts. This will not affect you if you rent your home. If you can't release equity for any reason, your trust deed could be extended to help you repay more of what you owe.

You should also bear in mind that like most debt solutions, a trust deed will have an impact on your credit rating. Records will be visible on your credit history for six years after it starts, which will make getting further credit difficult during that time.

How Much Does a Trust Deed (PTD) Cost?

We do not charge any setup fees for a PTD. Our associate partner Insolvency Practitioners will normally take a charge for their service out of your monthly repayments. This is known as the Trustee’s fee & Trustee’s Disbursements.

Here's an illustration of a typical trust deed:

Monthly payment £220
Total repaid over 48 months £10,560
Includes trustee's fees £4,150
Total debt written off £12,440

Illustrative example based on a typical client, who has no equity in their home, owing £23,000 of unsecured debt on a four-year trust deed. Fees include VAT where applicable.