Protected Trust Deeds

Protected Trust Deeds

Live in Scotland? A Trust Deed could be the best debt solution for you.

Trust Deeds exist to help people who live in Scotland, with their unsecured debts. The Scottish government introduced revised legislation in 2013 to further improve the process.

A Trust Deed or Protected Trust Deed (PTD) is the Scottish version of an Individual Voluntary Arrangement (IVA). Also known as Scottish Trust Deeds, PTDs are only available to people who live in Scotland.

Like IVAs, they involve making a formal agreement with your unsecured creditors to repay as much of your debts as you can afford over a set time period, usually four years.

Once your PTD is in place, your creditors are legally-bound not to pursue you for any of the debts listed within it. After the PTD has ended, any remaining debts will be written off and you’ll receive a letter of discharge.

PTDs can be a good alternative to bankruptcy as you can usually keep your home and other necessary assets such as a car to get to work. However, if you do own a property, you may need to re-mortgage it and/or release some equity to help pay off your debts.

How Protected trust Deeds work

A Protected Trust Deed in Scotland is a formal, legally binding arrangement between an individual and their creditors which lasts for a period of 4 years although a longer period can be considered.

It is a legal agreement which can only be carried out through a licenced Insolvency Practitioner (IP) who will act as the Trustee. It is only available to residents of Scotland and is designed to help individuals who are unable to repay their debts (more than £8,000).

At the end of the period, any remaining debt is written off by the creditors, subject to some exceptions.

A Scottish Trust Deed reduces unaffordable multiple payments to creditors to a single affordable monthly payment to the Trustee. It offers protection from creditors taking legal action against you and protects your home and car from repossession.

Cooperating with the Trustee

Entering into a PTD is voluntary. However, once a Trust Deed is in place, it’s legally binding. This means you must tell the Trustee if there are any changes in your personal circumstances that might affect the PTD. These include any increase or decrease in your income or expenses, a financial windfall, or the sale or gain of any assets.

Your Trustee will consider these changes and if necessary, will ask your creditors to vary the terms of your PTD and/or change your payment amounts. However, your creditors don’t have to accept these variations.

Some advantages and disadvantages of a PTD

 

Advantages

Disadvantages
  • Payments are based on your circumstances and what you can reasonably afford to pay.
  • Your Trustee will contact your creditors, which will remove the pressure of unwanted phone calls and letters.
  • All administration is dealt with by the Insolvency Practitioner.
  • Once the Trust Deed has become "Protected" creditors cannot take legal action to recover their debts and are bound by the terms of the Trust Deed.
  • It allows you to regain control of your finances.
  • All costs are met from your monthly contribution payments which you make into a bank account held in trust for creditors and are deducted from your monthly contribution payment and, if appropriate, from the sale of any assets.
  • At the end of the Trust Deed, normally a period of 4 years the balance of the debts included in your Trust Deed will be written off.
  • If you are a homeowner and have equity in your home this must be released to pay to your creditors. There are ways to do this without the need to sell your home, for example by re-mortgaging or by a third party or family member making payments on your behalf. Alternatively, it may be possible to extend your monthly contribution payments at the of the Trust Deed.
  • Creditors can vote against a Trust Deed becoming "Protected".
  • There are certain professional bodies which prevent members from signing a Trust Deed.
  • You may find it difficult to obtain credit in the future. Credit reference agencies will assess the level of risk based on your financial history which may include the Trust Deed

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