In This Guide...
Do I get my property back when I get my discharge?
Once you have transferred assets to your trustee, it is their duty to sell them for the benefit of your creditors. Any assets or money left over after all 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 (i.e. over-payment of social security), or if a creditor who objected to the agreement can prove in court that they would have got more of their money back if you had been made bankrupt. This is very rare.
- If the Trust Deed fails to become protected, your discharge does not stop creditors who objected in the first place from 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 score.
Can my trustee sell my house?
Yes. They can sell 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 the home from 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 if they think it would raise more money for your creditors.
- If one of your creditors believe they can prove they can get more of their money repaid if you are sequestrated, they can present a petition in court for your sequestration, even if it has been ‘protected’.
These are both very rare events. If you run up more debt after you have signed the Trust Deed, the people you owe the new debt to can petition for your sequestration.
What happens if I do not co-operate with my trustee or keep to what I have agreed?
They can petition for your sequestration (bankruptcy).
Is it recorded in the Register of Insolvencies?
Yes. And as this is a public register, anyone can use it. (Unprotected Trust Deeds are not recorded).
What if most of my creditors object to it becoming protected?
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.
How does it become a Protected Trust Deed?
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;
- Most of your creditors; or
- Creditors representing at least one third of your debts.
What are the advantages of a Protected Trust Deed?
- 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.
What happens if I have forgotten about a debt and I start receiving letters from the lender? Can I just add that one in?
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.
Will I be able to keep my car?
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.
What if my income increases 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. Each year, your Trustee will request bank statements and pay slips to ensure that you are still able to meet your monthly payment.
What happens if my income reduces while in a Protected Trust Deed?
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.
Do I have to tell my employer if I have a Protected Trust Deed?
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.
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.
Can I speak to several Insolvency Practitioners and then choose based on the 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, 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 Scottish Trust Deed?
Simply use our Trust Deed Calculator here. Based on the information you provide, we calculate whether you could qualify for a Protected Trust Deed or any other alternative formal Scottish debt solution. We will then contact you to begin finding out more about you. Alternatively, you can now set up a debt solution over WhatsApp.
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 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.
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 they need to be sure that it is the appropriate solution and 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?
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.
What are the repayments?
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.
How long does a Trust Deed last?
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.
How long does it take to set up?
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.
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.
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