What is a Protected Trust Deed?
A Protected Trust Deed is a formal fixed term debt solution for people living in Scotland.
It forms part of the Bankruptcy Scotland Act 1985, amended in April 2008, and acts as an alternative to debt solution to bankruptcy.
How Does It Work?
A Protected Trust Deed removes the legal obligation to maintain contractual payments to your existing unsecured debts, by replacing them with a single payment based on affordability.
The new payments are paid for a pre-agreed fixed term of, usually, 48 months. They are paid to a Trustee, the official who administers the trust deed. Their job is to make sure all parties adhere to the trust deed terms.
Whilst the trust deed is in force, all creditors named in the deed forfeit the right to take legal action for the recovery of the debt, they are also legally obliged to stop any interest charges or any late payments fines or penalties.
When the fixed term has completed successfully, the trust deed is considered satisfied and all outstanding balances left unpaid by the monthly contributions is legally written-off by the creditors, leaving the applicant debt free
Qualifying criteria
In order to qualify for a Protected Trust Deed you must be insolvent. This means that your assets must have a lower value than your liabilities.
Whilst there isn't a minimum debt requirement, it is generally agreed that a Protected Trust Deed is unsuitable for debt levels below £10,000 owed to 2 or more different creditors
A Protected Trust Deed is available to homeowners, lodgers or tenants, and people living with family that have been resident in Scotland for at least the last 6 months.
Your assets
Under the terms of your trust deed, ownership of your assets, including equity in your home, will be transferred to your Trustee for evaluation.
You will be given the opportunity to buy the Trustee's interest in any assets you transfer, by using 3rd party money or possibly by extending the duration of your trust deed. But if no agreement can be found, the Trustee has the power to sell the assets for the benefit of your creditors.
Ownership of a vehicle with a value less than £6,000 is normally agreeable, but vehicles with a value greater than this might cause issues.
Any other none essential assets such as second homes of monetary investments would also be taken into account as part of the trust deed.
Protection
As part of the initial trust deed set-up process, the Trustee will advertise the trust deed in the Edinburgh Gazette, one of the legal requirements of the process.
This notification gives creditors a defined period of 5 weeks within which to register their rejection of the deed.
Each creditor has the same chance to voice their disapproval, although the strength of the rejection will be proportionate with the percentage debt that a creditor is owed.
For the trust deed to reach 'protected' status, and therefore become legally binding on all parties, there must be no more than 33% of creditors, in debt value terms, that reject the proposed trust deed. Any creditor that doesn't vote will be deemed to have accepted it.
Alternatively, if more than half the actual number of creditors reject the trust deed, then it will also fail to become protected.
In reality, very few trust deeds fail to reach protected status as creditors know the trust deed generally offers a better return than the one they could expect from bankruptcy.
Apply For A Protected Trust Deed
All our trust deed applications are processed by our preferred firm of Scottish licensed insolvency practitioners and, as part of the process, you will be invited to their offices to go through all aspects of the trust deed, to make sure you are comfortable with everything. However, if you prefer, they would be more than happy to come to you at a time of your choosing.
So, if you would like to explore the trust deed solution with a professional adviser, call our helpline on 0800 088 7502.
Alternatively, complete the form below and one of advisers will call you at your preferred time.
