Scottish Trust Deed FAQ’s

Who can qualify for a Trust Deed?
How long does it take to set up?
How long does a Trust Deed last?
What are the repayments?
Will I have to sell my house?
Do I have to pay for the Trust Deed?
What if I am self employed?
Will my credit rating be affected by a Trust Deed?
What happens after I complete my Trust Deed?
How do I apply for a Trust Deed?

Who can qualify for a Trust Deed?

You need to be a resident in Scotland and owe at least £5,000 to apply for a Scottish Trust Deed. An individual can grant a Trust Deed. A Partnership or Limited Partnership can grant a Trust Deed. A Trust Deed can only be granted for an individual estate. A limited company and a limited liability partnership cannot grant a Trust Deed and a couple cannot grant a joint Trust Deed. If you run a company or limited liability partnership, or if you and your partner/spouse have joint debts contact us for more information about your options.

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How long does it take to set up?

Once the paperwork has been received the Trust Deed Company will begin to process you application, this can be as little as 5 days but on average takes 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).

She 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, the Register of Insolvencies entry, a claim form and a detailed statement of affairs, which will tell creditors all about your financial position, any excluded assets, 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 object to the Trust Deed becoming Protected. Anyone who does not respond is treated as having acceded to the Trust Deed becoming Protected. 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 acceded to the Trust Deed, she will record it in the Register of Insolvencies.

From the time that she records it in the Register of Insolvencies, the Trust Deed is Protected. This means that it is binding and as long as you complete your obligations you will be discharged from your debts after 48 months.

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How long does a Trust Deed last?

The typical period for a Scottish Trust Deed is 48 months, although in certain circumstances if you can repay creditors earlier or if you have a property to sell it may be possible to finish earlier. In contrast, if you will struggle to complete your obligations in 48 months, or if you arrange to make additional payments in place of the equity in your heritable property, it may be possible to arrange a longer period if reasonable and appropriate.

A Trust Deed will usually last 48 months (4 years). After this period as long as you complete your obligations you will be discharged from your debts and you will not need to deal with your creditors.

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What are the repayments?

Each Trust Deed case is different so this all depends on your personal circumstances. Repayments are calculated by a recommended Trust Deed Company who will 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 which 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.

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Will I have to sell my house?

Granting a Trust Deed could mean that your house may be sold and you might have to move home, unless it is excluded under the legislation or you can make alternative arrangements. The exclusion terms are quite complicated and are set out in section 2.8 of the Accountant in Bankruptcy’s Trust Deed Guidance, but they generally apply only to your main residence if it has little or no equity.

However, even if your property is not excluded you may be able to agree to make additional payments into your Trust Deed in lieu of the equity or arrange for a remortgage or third party contribution, so you have several options to avoid having to sell. No, unlike bankruptcy, a Trust Deed protects the equity in your house, and you will not be required to sell it be given an opportunity to make payments in lieu of any equity. More information of how Trust Deeds can affect your property can be found here.

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Do I have to pay for the Trust Deed?

You only have to make the agreed payments into the Trust Deed. Any costs are deducted from those funds before creditors are paid. Your creditors are effectively agreeing to receive less back so that your Trust Deed Company can take their Trust Deed fees for managing the arrangement.

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

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What if I am self employed?

If you are self employed you are still eligible for a Trust Deed. 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 he needs to be sure that a Trust Deed is appropriate and any payments are likely to be affordable.

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Will my credit rating be affected by a Trust Deed?

Yes, your credit rating will be affected temporarily until the Trust Deed is complete. You must make the agreed repayments every month for the duration of the Trust Deed (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.

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What happens after I complete my Trust Deed?

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.

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How do I apply for a Trust Deed?

Simply use our free Trust Deed calculator here. Based on the information you provide our system we calculate whether you qualify and we will contact you to begin processing your application.

 

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*Our advice is free but it may lead to other work for which we may raise charges.  Any work that we propose to undertake that may be chargeable will be fully explained before you commit to any particular course of action.  We will not do any chargeable work without your clear approval and you will be able to stop us working before any charges are incurred if you are not completely happy. You can read more about our fees here.