How Does A Trust Deed Work? Expert Guidance

A Trust Deed is an legally binding agreement betwen you and your creditors to repay a more affordable amount back to your debts over a set period (typically 48 months).  The Government introduced revised legislation in 2013 to help people who were struggling to repay debts to their creditors.

The process is simple; you make one lower affordable monthly repayment towards your debts for a set period (usually 4 years*), and after that time, then as long as you have met your obligations, you are discharged and not responsible for any remaining debt due to those creditors, thus affecting writing them off. It can be a powerful tool for those who are struggling to make thier minimum repayments on their debts.

How Do I Check If I Qualify?

Fill out our form to see if you qualify. We will then contact you and go through a financial statement with you to calculate a repayment figure which you can comfortably afford. Once this has been agreed the relevant paperwork will be sent to you which you must sign and return.

Once the paperwork has been received us, we will begin to process you application, this usually takes six-eight weeks. When you first sign the agreement with your Insolvency Practioner, who is an insolvency practitioner you have nominated, will notify the AiB (Accountant in Bankruptcy).

What Happens Next?

They will enter the details onto the Register of Insolvencies. The Trustee (Insolvency Practioner) 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 five 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 five weeks, less than half in number or one third in value of your creditors have objected, then the Insolvency Practioner must notify the Accountant in Bankruptcy as soon as possible but within a further four weeks.

If the AiB 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. This means that it is binding and as long as you complete your obligations you will be discharged from your debts after 48 months.

How Long Does The Trust Deed Scheme Term 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.

What About Obtaining Further Credit?

Once the Trust Deed is granted you will be bound by the terms of the agreement. 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 your debts and you will be free to obtain credit again.  You should be aware, 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.