A Trust Deed is a legally binding voluntary arrangement to allow consumers to write-off a proportion of their debt and avoid bankruptcy. A Trust Deed is only available in Scotland and is regulated under The Bankruptcy Scotland Act 1985. 

 

 

A Scottish Trust Deed may be suitable for you if:

 

 

 

An Insolvency Practitioner will make enquiries into your income and expenditure. The Insolvency Practitioner who will become the Trustee will then calculate your disposable income after taking into consideration the basic cost of living. This will provide the figure that you have free to pay your creditors on a monthly basis. This is usually expressed as an amount that you would be willing to pay for each £1 owed, for example the Insolvency Practitioner/Trustee may state that you are only able to pay back 30p for every £1 owed. Based on this figure the Insolvency Practitioner/Trustee will prepare a proposal and present this to the creditors. The Trustee will submit the proposal to the creditors and the creditors have 5 weeks of receiving notice to object. As long as the creditors who object are owed no more than 33% of the total debt then the proposal becomes legally binding to all of your creditors, even those that have objected. If certain conditions are met the creditors will freeze your interest and are not allowed to hassle you for the duration of the agreement. This is known as a protected Trust Deed. The monthly payments are then made to the creditors through the Trustee until the agreed number of payments has been made, which are normally for three years. 

 

A Trust Deed is not a magic wand to wipe out all of your debt. A Scottish trust Deed will only cover unsecured debt such as an overdraft, unsecured loans, credit card bills and store card bills. Scottish Trust deeds will not cover secured debt such as loans secured on your property or hire purchase agreements.  Also bear in mind that if you want to include an unsecured debt that you have with your own bank then they may close, restrict or downgrade your existing account. Nowadays though, most Trustees will be able to set you up a basic alternative bank account with a debit card facility. If you have equity in your property the creditors may only accept a Trust Deed proposal subject to you releasing any equity in your property to put towards the outstanding unsecured debt. Likewise, if you have a car that you do not use for work you may be asked to sell this. Similarly if you regularly pay into a private pension you may be asked to stop paying into the pension and to put that money towards your outstanding debt. 

 

The Trustee agrees their fees with the lenders. The fees are then paid to the Trustee from the Trust Fund account during the duration of the agreement. There are no set up charges and should be no upfront costs.

 

It is important that you can reasonably afford the proposed monthly figure and will be able to make the payments on a monthly basis for this period. If your expenditure is expected to rise, for instance if you are coming to the end of a fixed term mortgage deal, or your income is expected to fall, for instance if you are a working couple and are likely to have children in the next five years, then it is unlikely you will be able to meet the payments in the future. You will normally need to be reasonably stable and have a decent level of income, as if you fail to keep up the monthly payments, your Trustee can apply for a variation in the deed but unless your creditors will accept an even lower monthly payment, you may still end up being petitioned for bankruptcy. If you are in a Trust Deed and you are unable to make a payment then the most important thing is to make your Trustee aware immediately. If you don’t think you can keep up payments for the full term then you need to ask yourself is a Trust Deed the right solution for me?

 

Alternatively, if you get a wind fall of £200 or more, you are obliged to inform the Trustee. 

 

 

If you are looking for debt help then before proceeding with any solution you need to ensure that you have fully explored and understand all of the other options available to you. There are a number of non-for-profit organisations that can give you guidance in these areas. A comprehensive list of these organisations can be found at the end of this guide. If you have decided that a Trust Deed is the most appropriate and best option for you, speak to more than one company to compare the service and cost. Make sure you understand what the costs are and importantly if there are any upfront costs you need to understand what happens to this money if the Trust Deed proposal fails. Most Insolvency Practitioners and debt solution companies advertise FREE, confidential, no obligation debt advice scotland so take advantage of this before making any hasty decisions. Remember, once you enter a Trust Deed you are tied in for a number of years so it is not something to be entered into lightly but in the right situation could be the helpful hand that you need.