Protected Trust Deeds
Every year thousands of Scottish residents use Protected Trust Deeds to get their problem debt back under control and write off debt they can’t afford to pay.
Free debt counselling, debt adjusting and providing of credit information services is available to customers by contacting Money Helper.
May not be suitable in all circumstances. Fees apply. Your credit rating may be affected.
What is a Protected Trust Deed?
Protected Trust Deeds are a formal insolvency procedure, available only in Scotland.
Protected Trust Deeds are a legally binding agreement between an individual and a licensed Insolvency Practitioner (the IP, who acts as the Trustee) and is for the benefit of all unsecured creditors.
A Protected Trust Deed offer a viable alternative to other forms of debt relief such as the Debt Arrangement Scheme (DAS) or Sequestration (Scottish term for bankruptcy).
Trust Deeds work by transferring your assets to the Trustee and by you making a single, affordable monthly payment from your income for a minimum period of 48 months. The unsecured creditors receive payment from the funds received into the Protected Trust Deed and will write off their remaining debt at the end of the Trust Deed period. Please continue to read this section to find out if Trust Deeds sound like they could be the right solution for you.
When you enter into a Protected Trust Deed. your creditor contact will be reduced and once the term of the Protected Trust Deed has been successfully complete, the remaining balance of your unsecured debts will be legally written off
Your creditors will not pursue you for the written-off amounts, meaning you can look forward to a brighter future.
How does a Protected Trust Deed work?
Protected Trust Deed Qualification Criteria
The qualifying criteria to enter into a Protected Trust Deed is as follows:
- You currently live in or have lived in Scotland within the last 12 months, or have a place of business in Scotland.
- You have unsecured debts of £5,000 or more.
- You can pay a contribution from income and/or have assets that will enable a return to be made to creditors.
- You are insolvent i.e. you are unable to pay your debts as they fall due and/or your liabilities are greater than your assets.
If you qualify and decide that the Protected Trust Deed is the right solution for you, then you will sign all the relevant paperwork and your Trustee will attempt to have the Trust Deed protected.
By obtaining protected status, this means that your creditors cannot take legal action against you for recovery of their debts.
To achieve protected status, the Trustee must not receive objections from a majority in number of creditors or from any creditor(s) owed more than one third in value of the total debt.
Once protected, the Trustee’s main duty is to collect your income contributions, realise your assets and make the agreed payment to your creditors. Your agreed contribution is subject to review at least annually, or at any time if you experience a change in circumstances.
At the end of the agreed payment period (typically 48-60 months), your Trustee will make the final payment to your creditors and process your discharge. Once discharged, your remaining debts are legally written off and your Protected Trust Deed is complete!
Unsecured Debt
Customer Repayments
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Advantages & Disadvantages of Protected Trust Deeds
- You are protected from legal action from creditors
- One, affordable monthly payment, allowing for all general living expenses & household bills
- Creditor contact will stop – your Trustee will liaise with your creditors, taking away the pressure of constant phone calls and distressing mail
- Interest, fees and charges are frozen from the date your Protected Trust Deed is signed
- A Protected Trust Deed does not involve court proceedings
- Your home and other assets can be retained, subject to value and circumstances – do no delay in taking advice if you have assets that you wish to protect
- If you are facing legal action, need help quickly and have chosen a Trust Deed as your debt solution then the Trust Deed can be signed immediately
- An earnings arrestment will cease to have effect on protection of the Trust Deed
- After successfully completing a Trust Deed, you will be discharged from all remaining debts and the balances will be written off.
- Your credit rating may be adversely affected
- Creditors may object to the Trust Deed proposal in sufficient number or value, causing it to fail to achieve protected status
- Granting a Trust Deed may result in you being refused credit, before or after your discharge is granted
- You may not be able to act as a Director of a limited company, unless the company’s articles of association allow you to do so
- Student loans are not discharged in a Trust Deed (or a Bankruptcy)
- Equity in your property and/or other assets that you own may have to be realised for the benefit of your creditors, subject to value and your individual circumstances, do no hesitate to take advice if you have assets that you would like to protect
- Your Protected Trust Deed will be registered on the Register of Insolvencies, a publicly available online register of all insolvencies in Scotland
- Employment or future employment prospects may be affected by entering into a Trust Deed
- In a Trust Deed, the Trustee has claim on assets acquired for a period of 4 years from the date of signing the Trust Deed e.g. inheritance
Find out more
Contact our team at Harper McDermott to find out more about Protected Trust Deeds and any of the other debt solutions available to you in Scotland.
Harper McDermott are here to help you decide the best course of action to suit your individual needs and support you every step of the way. If you would like a fresh start, get in touch today!
Further Information
We provide advice on all statutory debt solutions available in Scotland, see below for more information:
Trust Deed FAQ
You are obligated under the terms of your Trust Deed (Section 5 – Co-operation and Provision of Information) to inform your Trustee of any of the following:
- Change of employment
- Change of address
- New contact information (telephone number & email address)
- Change of income (e.g. salary, bonus, overtime, commission)
- Any other matters relating to your financial affairs
As per Section 168 of the Bankruptcy (Scotland) Act 2016 you are required to pay your agreed contribution.
- If, for whatever reason, you are unable to do so, you must contact our Payments Team to discuss your circumstances at that time.
- Failure to maintain your payment, when it is affordable to do so, may lead to one of the following:
- As per Section 174 of the Bankruptcy (Scotland) Act 2016 your Trustee will instruct your employer to deduct your payment directly from your earnings
- As per Section 2 of the Bankruptcy (Scotland) Act 2016 your Trustee could petition for your bankruptcy.
By obtaining protected status, this means that none of your creditors can take any further action against you for the recovery of their debts. Upon protection, your creditors are legally bound by the terms of the Trust Deed.
When you have fulfilled all obligations in terms of your Trust Deed i.e. paid all contributions/complied with your Trustee, then you will be discharged from any debt incurred prior to signing the Trust Deed. Any remaining unsecured debt (other than those excluded) in your Trust Deed will be written off.
We will carry out the required statutory procedures to conclude your Trust Deed and you will then be formally discharged from your Trust Deed. A statutory form confirming your discharge will be sent to you.
Whilst there is no legislation to restrict you from using credit, there will be no allowance given in your income and expenditure for any repayments, therefore, it is deemed inappropriate to incur further debt whilst in a Trust Deed.
