The process for awarding protected trust deeds is to undergo improvement following the release of results from a public consultation conducted earlier this year by the Scottish Government, says debt management company Scottish Trust Deeds.
The consultation – “Protected Trust Deeds – Improving the Process” – gathered views and opinions from members of the public, debt advisers, industry experts and creditors to evaluate the current processes involved with applying for and being awarded a protected trust deed. On the list of issues under consideration were how the process could be made more efficient yet still remain fit for purpose as well as achieving an appropriate balance between what creditors and debtors need from the process.
As a result a number of proposals will be implemented as soon as possible through changes in practice or legislation, including:
- The introduction of an AiB (Accountants in Bankruptcy) Protected Trust Deed Guidance document, which will ensure best practice is adhered to
- A Protected Trust Deed Review Board
- A revised structure for trustee fees – one upfront fee for trust deed set up and a percentage administration fee based on the amount of funds collected from a debtor’s estate by the trustee
- Removal of the requirement for trust deeds to be published in the Edinburgh Gazette.
- Trust deeds to be placed in the Register of Insolvencies
- Equity freezing so the value of a debtor’s property is fixed at the time the trust deed is awarded
- Timescales for creditor claims
- Social Security Benefits no longer accepted as a contribution
Fergus Ewing, Minister for energy, Enterprise and Tourism, said: “The Scottish Government understands that by enhancing the protected trust deed process to ensure it effectively balances the needs of indebted individuals and their creditors, it will not only assist in the financial rehabilitation of individuals but will also help strengthen Scotland’s growing economy.”
A spokesperson for leading Trust Deed Company, Scottishtrustdeed.co.uk, welcomes the changes to the process as a big leap forward in efforts to make it more transparent to all parties involved. “Thanks to the public consultation, some of the changes that will now be put in place address numerous concerns that debtors have about Protected Trust Deeds, especially regarding the equity in their properties. The amount of equity will be frozen at the start of the process, thereby preventing trustees from equity ‘raids’ later on, sometimes even after the Trust Deed has ended.”
“In addition, trustees fees will have a limit put on them, so each trust deed has a fixed fee for setting it up and a fixed percentage for administering it. That will stop some of the more unscrupulous practices of considering trust deeds as a license to print money. Whether or not this results in many trustees refusing to deal with debtors if they believe they do not have enough value in their estate, remains to be seen. I suspect we will see some trustees setting minimum limits to the size of a debtors estate that they are willing to take on. This in turn could see some debtors forced down the route of debt arrangement schemes or sequestrations instead of getting the financial project most appropriate for their circumstances. Only time will tell,” concluded the spokesperson.
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