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Scottish Trust Deeds explained

A Scottish Trust Deed is Government legislation that is designed to help Scottish resident’s clear their debt. It is a legally binding arrangement between you and your creditors where you agree to repay a percentage of your total debts based on what you can realistically afford over a period of 36 months. The remainder of this debt will then be written off and you walk away free from debt.

This differs from many other debt solutions in that it can be much more flexible and affordable while at the same time providing protection from your creditors.

How does it work?
To enter into a Trust Deed you will need the help of a licensed Insolvency Practitioner who will assist you with the preparation work. This person will be known as the “Trustee”. The Trustee will go through all details with you prior to signing the agreement and then proceed to liaise with your creditors on your behalf. Later, in the case of the Trust Deed becoming ‘protected’, the Trustee will distribute contributions to your creditors.

How long does it last?
The arrangement usually lasts for a period of 36 months in which you will have agreed to a monthly payment schedule based on what you can actually afford. Once this has been agreed all documentation is drawn up and sent to you for signing. The Trustee will then place a notice and your creditors will have 5 weeks to respond with their decision. The Trust Deed will then become ‘protected’ if less than one third of your creditors submit a written rejection against it. If you have debts over £10,000 and are currently struggling to meet your repayments, This may be the right solution for you.

General Trust Deed FAQ’s

Can I ask anyone to be my trustee?
No. You must ask a qualified and registered insolvency practitioner. You cannot ask the Accountant in Bankruptcy.

Does a Trust Deed stop my creditors taking action against me?
Yes, but only if it becomes a ‘protected’. If it is not, only creditors who agree to it are bound by it. Those who object to it can still take legal action against you. They can even ask the court to make you bankrupt. The only way to stop all your creditors taking legal action is to have the Trust Deed Protected.

Who pays for it?
All the costs have to be paid out of the assets you transfer to your trustee and/or from money you pay as a contribution. But you will need to be in a job to sign a Trust Deed. How much do I need to owe before I can apply for one? It doesn’t matter. There is no set amount of debt needed.

Are Trust Deed terms laid down in law?
No. It is basically an agreement and can contain any terms you think your creditors will accept. You can sign one which only transfers some of what you own. But such cannot become a Protected Trust Deed and your creditors are likely to object to it. If you want it ‘protected’, you must transfer all you own except household items. There is a standard deed used for Protected Trust Deeds.

After I sign, what more do I have to do for my trustee and creditors?
You must co-operate with your trustee and keep to the terms agreed, and most importantly, your monthly payments. They may require you to pay a percentage of what you earn but this obviously depends on your salary amount. They will deal with your creditors from heron.

Are there any other consequences of signing a Trust Deed?
If you sign a Trust Deed, it allows a creditor (or creditors) who you owe at least £1,500 to petition for your sequestration in the 5-week period before it becomes protected. If those creditors write and tell your trustee that they object, they have an extra week to send their petition to court.

Can I still be a director of a limited company?
Usually the articles of a limited company stop a director from signing such an agreement. You need to check these articles. Can I hold other public office? Usually, but some public bodies have rules stopping anyone who has signed a similar agreement from holding office. Check with the body concerned.