A popular Scottish debt solution is a trust deed, also known as a Protected Trust Deed. Thousands of Scottish people enter a trust deed every year to resolve their debt problems. The debt solution is only available to people living in Scotland.
If you would like help with a Protected Trust Deed, get debt help from a charity. Debt Support Trust provides confidential debt advice for people thinking about entering a trust deed. We will also explain other debt solutions you may be applicable for, along with the fees, pros and cons and process attributed to each solution.
Call a Debt Support Trust debt advisor for trust deed advice on 0800 085 0226.
What Is A Protected Trust Deed?
A Scottish trust deed is a proposal which is sent to your creditors on your behalf by an insolvency practitioner. When entering a trust deed you stop paying your regular unsecured debts, including credit cards, payday loans and overdrafts. Instead, you would make a monthly payment to your trust deed for a fixed period of time.
As long as you maintain payments each month to your Scottish trust deed then you will be debt free, usually within 4 years, if not sooner. Any debt which is not repaid, along with interest and charges, would be written off at the end of the trust deed solution.
This means you become debt free and repay a percentage of your debt, with the remainder being written off.
What Debt Is Included in A Trust Deed?
A trust deed proposal will include all unsecured debt, including credit cards, overdrafts, personal loans, council tax, gas and electricity arrears.
The trust deed is designed to include every unsecured debt so that at the end of the debt solution you can restart financially.
You cannot include secured debts in a trust deed, if you want to retain the security. For example, if you have a mortgage on a property then this must be continued to be paid, if you want to keep the house. If you wish to hand the keys back on the property then any shortfall once the property has been sold can be included in a trust deed.
Once your trust deed is accepted by your creditors it will become a Protected Trust Deed. This means the creditors are bound by the terms of the debt solution.
Protected Trust Deed Scotland: The Positives
There are benefits for anybody wishing to enter a trust deed, these are,
- You only make one affordable monthly payment to one company.
- Interest and charges are frozen on all debts and written off at the end of the trust deed.
- You don’t have to speak to your creditors because your trust deed company will do this for you.
- You are protected from your creditors after you enter the trust deed so they can’t reverse the decision and both you and the companies you owe money to are bound by the terms of the trust deed.
- Most people entering a trust deed want to keep their property which is often possible. An insolvency practitioner is only interested in the equity.
Protected Trust Deed Scotland: The Negatives
- A Protected Trust Deed will be listed on your credit file as a default, lasting 6 years.
- Equity in a property would have to be released, either via a remortgage or third party buyout. The equity can be paid in various ways. If your equity exceeds your unsecured debt then the debt arrangement scheme may be a better debt solution.
- Some employers refuse their employees to enter a trust deed, so check your contract of employment before entering any debt solution.
- Failure to maintain your trust deed agreement could result in Scottish bankruptcy, sequestration.
- Monthly payments can change. An annual review is completed to make sure the payments are affordable. The payments to a trust deed can go up or down. Usually payments would increase if you had more income from your job, or reduced your expenditure.
Criteria for a Protected Trust Deed Scotland
To enter a trust deed you must meet certain criteria. The criteria for a trust deed is
- You can afford a monthly payment of at least £125 to the debt.
- Unsecured debts through credit cards, overdrafts etc must total £10,000 or more.
- At least 10% of the money owed must be repaid after fees and charges.
Scottish Trust Deed Process and Fees
Everybody entering a trust deed will need an insolvency practitioner to propose the debt solution. The trust deed will prepare the application and liaise with creditors. An insolvency practitioner is an accountant that specialises in insolvency debt solutions.
An insolvency practitioner will always require payment to manage the trust deed. The trust deed fees come from your monthly repayments towards your debt. The fees are used to
- Create and distribute your Trust Deed proposal
- Speak and respond to creditors you owe money to
- Collect your monthly payments on behalf of the creditors and realise any equity from assets
- Reporting to creditors and the industry regulator, the Accountant in Bankruptcy
- Any other issues that arise within the trust deed
A Trust Deed company will agree in advance their fees with yourself and the creditors. The trust deed practitioner will also be responsible for paying vat and disbursements to run the trust deed. The fees applicable for your trust deed will be explained and included within your proposal sent to your creditors.
If your Protected Trust Deed (Scotland) were to fail, typically this happens if you stop making your payments to your debt solution, you would be liable for repayment to your creditors. You may also face Sequestration.
After the trust deed is signed and protected it will be listed within the register of insolvencies. Your creditors will be presented with your proposal and as long as 1/3rd of the value of your creditors accept the proposal then your trust deed will become protected.