Trust Deed

A Trust Deed is a debt solution only available to residents of Scotland. It is a formal agreement between you and your creditors to pay back what you can afford towards your debts. A Trust Deed is designed for people who have taken out too much debt and are struggling to meet their monthly repayments. The usually repayment period for a Trust Deed is 36 months (3 years). You will be required to pay a set amount per month for the 36 month period, after that your creditors are legally obliged to write off any remaining debts.

Example of a Trust Deed

Example of how a Trust Deed can help with your debt problems

Unsecured loan £12,000
Credit card £8,000
Store card £4,000
Total owed £24,000
36 monthly payments £250
Total repayment £9,000
Debt written off 62.5%

Trust Deeds vary and what you can afford towards your debts is the main factor

Is a Trust Deed the right solution for me?

If you are a resident of Scotland (for at least the previous six months) and you are looking to avoid Bankruptcy/Sequestration with debts of more than £8,000 to two or more creditors, then a Trust Deed could be suitable for you.

What are the fees for this service?

Unlike many other debt management companies, you should not have to pay anything upfront. The Trust Deed proposal will contain details of what is being paid to the Insolvency Practitioner (IP) for acting as Trustee. All fees are agreed prior to the arrangement and are included in the repayment plan. Once the Trust Deed has commenced, there are no additional costs or fees added to monthly contributions.

Will interest and charges be frozen?

Yes, once a Trust Deed proposal is accepted by your creditors, all interest and charges are frozen.

What debts can be included in a Trust Deed?

Debts that can be included in your Trust Deed are as follows:

  • Personal unsecured loans
  • Pay day loans
  • Credit cards
  • Store cards
  • Charge cards
  • HM Revenue & Customs debts (VAT, PAYE, Self-assessed tax, National Insurance)
  • Catalogues
  • Bank overdrafts
  • Unsecured debts that have a CCJ or Attachment of Earnings in place
  • Personal debts owed to businesses
  • Personal debts owed to family or friends
  • Previous utility (Gas, Water and Electric) suppliers
  • Previous TV/mobile/telephone service providers
  • Debts previously secured against an asset that has since been repossessed

What debts cannot be included in a Trust Deed?

Debts that cannot be included in your Trust Deed are as follows:

  • Mortgages
  • Secured loans
  • Rent and property service charges
  • Current utility (Gas, Water and Electric) debts
  • Current service provider (TV/mobile/telephone) debts
  • Hire Purchase (HP) agreements
  • Student loans
  • Benefits overpayments
  • Child maintenance
  • Council tax
  • Court fines

Is my home at risk?

No, unlike Bankruptcy/Sequestration, your house is safe in a Trust Deed. However, if you have any equity in your property it may be taken into account to repay as much debt as possible.

How long does a Trust Deed last?

The duration for a Trust Deed is 36 months. Sometimes is can be less if you are awarded an early discharge.

What are the advantages of an Trust Deed?

1. Single Affordable Payment

A Trust Deed will only require you to pay what you can afford to your creditors, once your essential living costs have been accounted for, removing the financial burden of having to pay more.

2. No Fees Or Charges To Pay

The fees that are incurred in setting up and administering a Trust Deed are borne by the creditors. The Trustee deducts his fees from out of the contributions you pay into your Trust deed fund each month.

3. Fixed Repayment Term

A Trust Deed has a fixed repayment term, which is normally only 36 months (3 years).

4. Remaining Debt Written Off

A Trust Deed will legally write-off any money that has not been repaid at the end of the arrangement. Creditors are legally bound to accept that all the outstanding balances are considered full and finally settled once the Trust Deed has been completed successfully.

5. Interest and Charges Stopped

A Trust Deed places a legal requirement on each creditor to stop adding interest and charges to the outstanding balance whilst the agreement is active.

6. Legally Binding Agreement

By allowing a Trust Deed to reach a ‘Protected’ status, the creditors become legally bound by it and, as such, they must comply with the demands of the Trustee and all his decisions. This is one of the major pros or advantages because you are no longer having to deal with the situation on your own.

Are there any disadvantages to a Trust Deed?

1. Credit Rating Effected

A Trust Deed will be recorded on your credit file for three years after the completion.

2. Threat of Bankruptcy/Sequestration If Not Adhered To

A Trust Deed is a legally binding arrangement, which if not adhered to will most likely result in Sequestration.

3. Limited Company Directors May Be Affected

A director of a Limited company would not be allowed to continue in their role and enter into a Trust Deed. Instead, they would be required to resign as a director before they could make their application.

4. Creditors Must Accept The Agreement

The creditors must vote on accepting the arrangement. If 30% decline, this could prevent the Trust Deed arrangement from being accepted.

What is a Protected Trust Deed (PTD)?

If the Trust Deed becomes “Protected”, the creditors cannot petition for Sequestration or any further court action. Adverts can be placed in government publications, however if more than one third of the creditors object, this can prevent the Trust Deed from becoming Protected. A Protected Trust Deed will also stop any further action by a creditor towards a debtor’s property or assets.

How long does a Trust Deed take to set up?

The process can take up to 6-8 weeks to conclude. During this period, you will not be expected to continue to make payments to your creditors until any outstanding issues have been resolved.

How do I apply for a Trust Deed?

Simply complete the online assessment form on this page.