What is a Scottish Trust Deed?
A Trust Deed is a form of insolvency and a formal agreement between you and your creditors to pay back only what you can afford towards your debts.
Once Protected it is a legal way to help you back on the road to financial stability. A Trust Deed is designed for people who have debt and are struggling to meet their monthly repayments. A Trust Deed can help you write off unaffordable debt if you qualify and typically lets you pay back what is deemed affordable for 48 months.
There are benefits and considerations to a Trust Deed you must always understand first.
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Find out if you qualify
What is the criteria to be able to apply?
- You need to live in Scotland
- Your debts must be over £5000
- You must have a provable form of income
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, to pay for any equity within your home, so you have several options to avoid having to sell. More information of how Trust Deeds can affect your property can be found here. A Scottish Trust Deed may also require you to sell high value items to raise funds to pay your creditors. 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 advertised
When you grant your Scottish Trust Deed, it will be recorded on the Register of Insolvencies, which is a public record.
Don’t 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 could fail and you will not then be discharged from your debts. 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 the agreement. This is why it is extremely important for you to declare all of your debts to your Trustee at the beginning.
Scottish Trust Deed FAQs
Who can apply?
A Scottish Trust Deed, or PTD, could be an option for you if you live in Scotland, have £5,000 or more of unsecured debt and cannot repay it in full within 4 years. You cannot apply for a joint Trust Deed, or apply for one if you have been sequestrated and not yet discharged. The following can sign a Trust Deed:
- A living individual,
- A partnership,
- A limited partnership (within the meaning of the Limited Partnerships Act 1907(6)),
- A trust, a corporate body,
- An unincorporated body of persons.
What debts are included?
A Protected Trust Deed covers all your unsecured debts with a few exceptions:
- Student loans,
- Court fines,
- Debts incurred as a result of fraud or breach of trust,
- Obligation to pay aliment (e.g. child support),
- Periodical payments to an ex-spouse as ordered by a sheriff.
How do I apply?
Call us on 0141 or Complete The Eligibility App now.
Find out if you qualify
It’s important you speak to our dedicated team to fully understand and assess each of your options.
A PTD is not the only method of addressing your debts and you should be happy it’s the best option for you before proceeding.
When you speak to us we will take time to establish who you owe money to, how much you can afford to pay, and what your assets are worth. We will discuss the implications of each of the formal and informal options available to you.
How does a trust deed become protected?
Shortly after signing your Trust Deed, your Trust Deed company will place a notice of your Trust Deed in the Register of Insolvencies. They will also write to all known creditors and your creditors are given a period of 5 weeks to object to your Trust Deed proposal.
Your appointed Trustee works closely with your creditors and their representatives. We will be able to recommend from the outset of your Trust Deed whether your creditors are likely to object.
Assuming a sufficient number of creditors agree to the Trust Deed, it will become a Protected Trust Deed and will be updated on the Register of Insolvencies accordingly.
Once your Trust Deed becomes a Protected Trust Deed, this means that your creditors are bound by the terms of the Trust Deed and can take no further action against you to recover their debt.
Once you have completed your Trust Deed, you will no longer be liable for the debts included within it. Your Trustee will deal with your creditors from the point you sign your Trust Deed and if you receive any contact from your creditors, you can simply refer them to your Trustee.
Payments into the Trust Deed and fees
Each individual Trust Deed is different so this all depends on your personal circumstances. Repayments are calculated by using the Common Financial Tool (CFT). The CFT is designed to provide sufficient allowance for you to meet your living expenses and for you to pay only what is deemed to be affordable to your debts.
However there is generally a minimum repayment level which if the repayment level is too low the creditors or the Accountant in Bankruptcy can prevent the Trust Deed from becoming protected.
The Trustees’ fees are met from the payments made into the Trust Deed and you will not be required to pay any additional fees.
Bank account - can I still have one?
Yes, however we would always recommend where possible to have a bank account with a bank you own no money to. We would let you know if this was needed in your case and help you do this before signing the Trust Deed.
Credit file - how does it affect it?
Your credit file will be updated to show that you have signed a Trust Deed and this information will remain on your credit file for a period of time, however, once discharged from your Trust Deed, you can obtain a certificate of discharge which you can then register with credit reference agencies to allow you to rebuild your credit profile.
Employment - how does it affect it?
In most cases people can sign a Trust Deed without any impact on their employment, but it’s always advisable to check your contract of employment or speak to your HR manager/department.
What if I'm self-employed?
If you are Self Employed, you are still eligible for a Trust Deed. Many Self Employed people enter in to Trust Deeds and can carry on with their trade.
Completion of the Trust Deed - what happens after?
After the 48 month period (or otherwise agreed timescale) is over you are legally discharged from your debts. You will receive a certificate of discharge from your Trustee and your credit file will show you have completed your Trust Deed, this is when you can start to rebuild your credit rating.