Trust Deed FAQs

They can petition for your sequestration (bankruptcy).

Yes. And as this is a public register, anyone can use it. (Unprotected Trust Deeds are not recorded).

If your creditors reject a Protected Trust Deed, you can petition for your own sequestration if; 1. You owe at least £3000, and 2. You have not been made bankrupt in the last 5 years.

If you are not sequestrated, a Trust Deed will continue to run even if it does not become ‘protected’, but creditors who have objected to it can still petition for your sequestration.

Your trustee must do the following: 1. Put an advert into the Register of Insolvencies. 2. Write to everyone you owe money to telling them that you want a Protected Trust Deed.

The people you owe money to have 5 weeks to object. Normally it automatically becomes ‘protected’ unless your trustee receives written objections from either;

1. Most of your creditors; or
2. Creditors representing at least one third of your debts.

• You are protected from legal action from creditors while in a Trust Deed.
• You’ll make one, affordable monthly payment.
• Creditor contact will reduce and stop.
• Interest, fees and charges are frozen.
• An earnings arrestment will cease to have an 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.

Tackling your debts can be stressful and sometimes debts can be forgotten.

If one pops up, simply tell your Trustee as soon as possible and they will try to have it included in your agreement.

If your car is an inexpensive model and is needed for work, then you should be able to keep it. However, if it is an expensive model, you may be required to sell it and buy a less expensive vehicle.

You should declare this to your Trustee who may decide to recalculate a new monthly payment that reflects the increase. Each year, your Trustee will request bank statements and pay slips to ensure that you are still able to meet your monthly payment.

The first thing you should do is inform your Trustee as soon as possible.

They may be able to arrange a payment break until your situation improves. However, if circumstances look like they will not improve because of, for example, long-term illness, your Trustee may be forced to petition for your sequestration. However, this is usually the very last resort.

There are certain jobs which require you to disclose if you have entered into a formal debt solution, so it is worth reading your employment contract to check if it contains a clause to this effect.

Most employers are understanding should it happen and it is highly unlikely to affect your job.

If you cannot get your Trust Deed protected – for example if your creditors object – and you decide you do not want to continue making payments, it will be considered to have failed and your Trustee can petition for your sequestration.

However, this very rarely happens unless your creditors believe that they will get more money from you through bankruptcy.

Unfortunately, no. Because of the amount of work involved negotiating your repayments with creditors, you will have to choose the Insolvency Practitioner you wish to work with before any payments will be proposed.

Spend some time shopping around for a good company, explain your situation thoroughly and ask lots of questions so you can make the right decision for your circumstances.

After the 48-month period is over you are legally debt free you will be discharged from your debts.

You will receive a certificate of completion discharge from your Trust Deed Company and your credit file will show that you have completed the Trust Deed, this is when you credit rating will start to improve.

Yes, your credit rating will be affected for up to six years. You must make the agreed repayments every month for the duration of the plan (usually 48 months) and you will not be allowed to obtain any further credit until this period has elapsed.

Once this period is over you will be discharged from any existing debts and you will be free to obtain credit again.

You should note, however, that granting a trust deed is an admission of apparent insolvency and it will have an impact on your ability to obtain credit in future.

You may not be able to obtain credit immediately after you are discharged from your Trust Deed and you may find credit more expensive for some time after your discharge.

The decision to offer credit and the charges made for it will depend on the policies operated by individual lenders.

If you are self employed you are still eligible to apply. All the normal requirements still apply, you just need to be able to prove your income.

This would usually be 6 months’ worth of trading accounts from your business, but your Trustee will ask for whatever information they need to be sure that it is the appropriate solution and payments are likely to be affordable.

You only must make the agreed payments into the plan. Any costs are deducted from those funds before creditors are paid.

Your creditors are effectively agreeing to receive less back so that we can take their fees for managing the arrangement.

There are a couple of exceptions to this general rule that you should be aware of before committing.

If your home increases in value or if you are the beneficiary of an unexpected lump-sum payment, you will have to pay more into your plan and if that enables you to satisfy your debts in full, you may be liable to pay an additional amount to cover your Trustee’s fees.

This is a common question that homeowners ask when they approach us for Debt Advice, and the answer in most cases is No.

In a Trust Deed, your mortgage is protected so that you would continue paying it as normal – subject to approval, and completion.

If your house was at risk as a result of entering into a Trust Deed, we would look at the Debt Arrangement Scheme.

Each case is different so this all depends on your personal circumstances. Repayments are calculated by our advisers after they assess your current income and expenditure against agreed guidelines known as the ‘Common Financial Statement’.

From this, they will calculate a figure you can comfortably afford. However there is a minimum repayment level. If the repayment level is too low, the creditors or the Accountant in Bankruptcy can prevent the Trust Deed from becoming protected and you may be sequestrated.

The typical period for a Scottish Trust Deed is 48 months.

If you can repay creditors earlier, or if you have a property to sell it may be possible to finish earlier.

Additionally, if you will struggle to complete your payments in 48 months, or if you arrange to make additional payments in place of the equity in your property, it may be possible to arrange a longer period.

After this period, if you complete your obligations you will be discharged from your debts and you will not need to deal with your creditors.

Once the paperwork has been received by us, we will begin to process your application, this can take an average of 6-8 weeks depending on how quickly you supply the information to us.

When you first sign your Trust Deed, your Trustee, who is an insolvency practitioner nominated by you, will notify the AiB (Accountant in Bankruptcy).

The IP will enter the details onto the Register of Insolvencies. The Trustee must then within seven days;

• Notify all of your unsecured creditors, providing copies of the Trust Deed
• Provide the Register of Insolvencies entry
• Provide a claim form and a detailed statement of affairs, which will tell creditors about your financial position
• Disclose any excluded assets and any payments you have agreed to make and the likely outlays and distribution prospects.

They then have until 5 weeks from the date that your details were entered onto the Register of Insolvencies to raise any objections. Anyone who does not respond is assumed to have agreed to the repayment plan.

If, by the end of the 5 weeks, less than half in number or one third in value of your creditors have objected, then the Trustee must notify the Accountant in Bankruptcy as soon as possible but within a further 4 weeks.

If the Accountant in Bankruptcy is happy that the correct disclosure has been made, the procedure has been followed and enough creditors have agreed to the Trust Deed, they will record it in the Register of Insolvencies.

From the time that they record it in the Register of Insolvencies, the agreement is Protected. This means that it is binding and if you complete your obligations, you will be discharged from your debts after 48 months.

You need to be a resident in Scotland and owe at least £5,000 to apply for a Scottish Trust Deed.