A Brief Guide to Trust Deeds (Scotland)  

Debt and financial pressure is now a way of life for most ordinary people. It is also a fact of life that people’s financial situations may change drastically resulting in money worries, sleepless nights, pressure from creditors and worse. This booklet will hopefully provide some information on how a Trust Deed could assist in easing the pressures of financial burdens.

Trust Deeds

A Trust Deed is a document appointing a Licensed Insolvency Practitioner to deal with your financial affairs. By signing the document, you undertake to agree to a repayment proposal, under the guidance of a Trustee. The proposal can usually range for payment of anywhere between 10p in the £ to 100p in the £ to your creditors over a set period (usually 3 years). In return, you will receive protection from your creditors which may otherwise involve having your wages arrested, an attachment and auction of your personal possessions (other than those household contents which are protected by law from being sold) as well as general pressure fro payment from your creditors, through correspondence with threats and often late night phone calls at home.

The advantages of a Trust Deed are:

  • It releases you from the pressure of creditors
  • A Trust deed does not automatically affect your credit rating
  • There is no court appearance and no adverts appear in local papers
  • You can hold a bank account and can continue to be self employed
  • You would retain your car if it is required for work, but any vehicle or equity in the motor vehicle will have to be repaid over to the Trustee in much the same was as the treatment of equity in the home is described earlier in this brochure

The following chart shows the three main options and how they compare

  Bankruptcy IVA Informal Agreement
How long does it last? 3 years Usually 3 years Indefinitely
Can creditors arrest my wages or carry out an Attachment / Auction? No NO Yes
Will I be able to obtain credit? Up to £250 Yes Yes
Can I have a bank account? Yes Yes Yes
Will I have to go to Court? No No Possible
Will I have to continue until I pay the debts in full? No No Yes
Will my employers find out about my debts? No No Possibly
Will I loose my home? (please see below note) Possible, unless the amount of equity can be paid to the Trustee during the three years by a third party Unlikely, unless the amount of the equity is too great to be paid by a third party to the Trustee during the Trust Deed, either in a lump sum or by instalments over a reasonably short period No, if you maintain a mortgage
Can creditors pursue me for any outstanding amounts? No No Yes

How Trust Deeds affect you    

Your Home and Other Assets  

Signing a Trust Deed does not necessarily mean your Trustee will sell your home. Your Trustee will require to calculate if there is any equity/profit in your home (Equity/profit = The value minus any mortgage/secured loans) Remember your Trustee only has an       interest in your share of the equity if the property is jointly owned with your spouse or partner, whose share is protected from your creditors, unless the debts are in joint names. A common solution is for the property to be re-mortgaged to release the Trustees interest and further details can be made available upon request. Other assets such as life endowment policies are dealt with in similar fashion.  

Do I have to pay my debts in full?  

Not necessarily. Remember a Trust Deed is an agreement with your creditors for repayment of a specific amount of your debt. Your Trustee will work out the value of any assets or an agreed monthly contribution and make a proposal to your creditors.  

Will my creditors agree to a Trust Deed?  

Once creditors are notified of the Trust Deed, they have a period of 5 weeks to object to it. For a Trust Deed to fail, your Trustee will have to receive objections in writing from more than 50% of your creditors or at least one third in value. Creditors who do not write back to the Trustee with a specific objection are deemed to have accepted.   In practise, it is unusual for a Trust Deed to fail. Once the period of 5 weeks expires, the Trust Deed becomes a Protected Trust Deed and thereafter all creditors are bound by it. If less than 50% or less than one third object to it, they are still bound by the Trust Deed and cannot carry out any action against you for recovery of any debts.  

What if my debts are joint with my partner?  

A Trust Deed deals only with your financial affairs. If you have joint loans with your partner, then your creditors have the option of pursuing your partner for the full amount.         What do I do next?   For an informal and confidential chat about any debt problems, contact us or call 0800 0800 9 555 289 . We will be happy to discuss any money problems and hopefully be able to provide a solution. A home visit may be necessary before we finalise any arrangement for you.   Do it now, don’t wait—because we can help.    

Will my creditors agree to a Trust Deed?

Once creditors are notified of the Trust Deed, they have a period of 5 weeks to object to it. For a Trust Deed to fail, your trustee will have to receive objections IN WRITING from more than 50% of your creditors or at least one third in value. Creditors who do not write back to the Trustee with a specific objection are deemed to have accepted.