Protected Trust Deeds | What you need to know - Part 2

Protected Trust Deeds are rapidly rising in popularity as a debt solution where sequestration is a real and frightening possibility. In the first part of this article, we briefly discussed Protected Trust Deeds before answering some of the many questions our advisors have been asked over the last few years. This article continues in the same vein with more questions and answers that can help you decide whether a Protected Trust Deed is right for you. Remember these are real life questions from people who have been in the same position as you and understand exactly how you feel:

Q) Is there any way of keeping a notice out of the Edinburgh Gazette in case my friends or family see I have taken out a Protected Trust Deed?

Your Trustee is legally required to record your Protected Trust Deed on the Register of Insolvencies and put this notice in the Gazette. It cannot be bypassed. However, the Edinburgh Gazette is not like a normal local newspaper. It is usually only read by members of the legal profession so your family or friends are unlikely to see the notice by accident. They would have to go to some lengths to find your name among the many notices from Trustees across Scotland.

Q) Am I able to keep my savings for emergencies?

Unfortunately not - all of your savings must be transferred to your Trustee who will distribute it to your creditors. However, if you have an emergency that requires immediate cash (for example a broken boiler or burst pipe) your Trustee may be able to arrange a payment holiday to allow you time pay for the emergency.

Q) Will my property be sold? Will I have to move into rented accommodation while I'm paying off my Protected Trust Deed?

Not at all! At the beginning of your Protected Trust Deed your Trustee will arrange to have your property valued and stipulate a sum of equity that will be released and paid to the creditors at the end of the Protected Trust Deed. However, the house will be revalued at the end as well and any increase in equity adjusted accordingly to reflect a higher payment to your creditors. If there is a large amount of equity available which could pay off your creditors and you cannot get a remortgage to release it, you may have to sell your property.

Q) What if my family wanted to gift some money to me in the form of an extension or a conservatory on my property?

Any alterations that are made to the property that increase its value, such as an extension or conservatory, are seen as financial gain. Your Trustee will have your property revalued at the end of the Protected Trust Deed and a proportion of the increase in equity will be earmarked for release.

Q) If I suddenly come into money, how much would be taken for creditors?

There are no hard and fast rules, but it is likely your Trustee will take anything from 50-100% of the money to pay creditors. Windfall money that your Trustee needs to know about includes inheritances, lottery or bingo wins over £200, redundancy payments, bonuses, and bank charge or insurance refunds.

Q) I have a current account with cheque book, debit card and credit card. Can I keep these?

The terms of a Protected Trust Deed only allow a basic bank account with one cash card, and you will not be able to change your bank or building society once the Protected Trust Deed is up and running. Also, you cannot have credit of more than £250, so you will have to be very careful if you need to obtain professional services that are charged at hourly rates such as legal advice.

Q) All of my debt is in my name and not my spouses/partners. Will only my income be taken into account as a result?

It is not the debt owner's sole income that is taken into account but the household income. If your spouse or partner has income this will be used by the Trustee to calculate your payments to your creditors. So too will child benefit, child tax credit, working tax credit, pensions and any income support payments.

Debts can sometimes seem crippling and fill you with a sense of despair, especially when it seems that sequestration is the only option. Protected Trust Deeds often prove to be life-savers in these cases and have helped millions of people over the years to a happy debt-free future.

To see if you qualify for a Protected Trust Deed click here.

To read part 1 of this article, please go here.