Once you have transferred assets to your trustee, it is his duty to sell them for the benefit of your creditors. Any assets or money left over after all the expenses and debts have been paid should be returned to you.
When will I be discharged from my debts?
It will say in your agreement how long it is to run for and when you will be discharged. Normally it is 4 years from the date you sign it (though it can be longer). But unlike in a sequestration, this discharge is not automatic.
Your creditors must discharge your trustee before you can be discharged.
This means a Protected Trust Deed may remain open in the Register of Insolvencies for some time after the 4 years. Your discharge is usually binding on all your creditors. This means they can’t chase you for the money you owed them before you signed the agreement.
But there are 2 exceptions. These are;
- Debts not covered by the agreement (like over-payment of social security), or if a creditor who objected to the agreement can prove in court that he would have got more of his money back if you had been made bankrupt. This is a very rare event indeed.
- If the Trust Deed fails to become protected, your discharge does not stop creditors who objected in the first place still chasing you for the money you owe them.
Will credit reference agencies blacklist me?
No, you won’t be blacklisted but you may find it difficult to obtain credit whilst on the plan and for a period after. Once the plan is complete your credit rating will start to improve.
There are things you can do to help improve your credit rating, like taking out a credit card and paying it off in full every month.
This shows lenders that you can borrow money responsibly and pay it back on time and in full. This is one of the most effective ways to improve your credit file.
Can my trustee sell my house?
Yes. They can sell all the property, but, if your house is jointly owned or if it is the family home, your trustee needs the permission of the other owner or anyone else who has rights to live in the house.
If the other owner refuses permission to sell, the trustee can go to court to try and force what is known as a division and sale.
If this is granted, the house can be sold, and your share of the money raised will go to pay off your debts. The other owner will get their share).
Normally if you have Equity in your property a small re-mortgage to raise funds will prevent home being sold.
Can I be sequestrated for any other reason?
Sometimes, but it doesn’t happen very often.
- Your trustee can petition to have you sequestrated at any time they think it would raise more money for your creditors.
- If one of your creditors thinks they can prove that they can get more of their money repaid if you are sequestrated, they can present a petition in the court for your sequestration, even if it has been ‘protected’.
What happens if I do not co-operate with my trustee or keep to what i have agreed?
They can petition for your sequestration (be made bankrupt).
Is it recorded in the Register of Insolvencies?
What if most of my creditors object to it becoming protected?
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.
How does it become a protected trust deed?
Your trustee must do the following: 1. Put a notice (advert) in a publication called the Edinburgh Gazette. 2. Write to everyone you owe money to telling them that you want a Protected Trust Deed and sending them a copy of the notice in the Edinburgh Gazette.
The people you owe money to have 5 weeks to object starting from the date the notice appears in the Edinburgh Gazette. Normally it automatically becomes ‘protected’ unless your trustee receives written objections from either;
- Most of your creditors; or
- Creditors representing at least one third of your debts.
What is the advantage of a protected trust deed?
It stops all your creditors (even those who object) from chasing you for the money you owe them.
What happens if I have forgotten about a debt and I start receiving letters from the lender? Can I just add that one in?
With all the stress involved with sorting out a bad financial situation sometimes debts can be forgotten, especially if they are the “buy now, pay later” type of debts which have become common when buying large or expensive household items.
If one pops up, simply tell your Trustee as soon as possible and they will arrange to have it included in your agreement.
Would I be able to keep my car? I use it for work
If your car is an inexpensive model and is needed for work, then you should be able to keep it. However, if it is a very expensive model and its sale could release money to pay your creditors, you may be required to sell it and buy a less expensive vehicle.
What if I get a pay rise or move to a better paid job while in a Protected Trust Deed?
You should declare this to your Trustee who may decide to recalculate a new monthly payment that reflects the increase. From time to time your Trustee will request bank statements, pay slips and a statement of affairs to ensure that you are still able to meet your monthly payment.
What happens if I lose my job or my income drops while in a Protected Trust Deed? What if I cannot afford the fixed repayment amount?
The first thing you should do is inform your Trustee as soon as you know you will have a problem paying.
They may be able to arrange a payment break until you find another job. However, if circumstances look like you will be unable to 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.
Do I have to tell my employer if I have a Protected Trust Deed?
Can I back out of a Trust Deed if I cannot get it protected?
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.
Before I sign can I speak to several Insolvency Practitioners and then choose one based on the proposed repayment figures?
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 (our advisors will give you some recommendations when you call), explain your situation thoroughly and ask lots of questions so you can make the right decision for your circumstances.
How do I apply for a Trust Deed?
Simply use our free 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.
*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 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.
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.
Will my credit rating be affected?
Yes, your credit rating will be affected temporarily until the repayment period is complete. 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.
Can I get a trust deed if I’m self-employed?
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 he needs to be sure that it is the appropriate solution and any payments are likely to be affordable.
Do I have to pay for the Trust Deed?
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.
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 re-mortgage or third party contribution, so you have several options to avoid having to sell.
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 it can affect your property can be found here.
What are the repayments?
Each case is different so this all depends on your personal circumstances. Repayments are calculated by a recommended by us after we 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.
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.
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.
How long does it take to set up?
Once the paperwork has been received us we 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.
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 all 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 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 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.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here