A Trust Deed is a legally binding debt payment programme available in Scotland. It allows you to repay money you owe through a series of monthly payments, and write off any remaining unsecured debts at the end of the arrangement.
In this guide, we’ll explore exactly what a Trust Deed is, how it works, who qualifies for a Trust Deed, and how it helps people in Scotland deal with serious debt problems.
A Trust Deed allows you to avoid bankruptcy by making a monthly payment towards your debts over a period of four years, after which your remaining debts will be written off.
Trust Deeds work by transforming all of your unsecured debts into a series of affordable monthly payments, which you then repay over a period of four years.
Trust Deeds are set up by a Trustee – usually a licensed debt professional known as an Insolvency Practitioner (IP). They will help you come up with a debt repayment plan based on what you can afford.
Once you enter a Trust Deed, you enter a legally binding contract with your creditors. A Trust Deed freezes interest and charges on your debts, and as long as you maintain your monthly payments, any debt left over at the end of the Trust Deed will then be written off.
Trust Deeds might be the best option for people with unsecured debt who meet the following criteria:
In England, Wales, and Northern Ireland, the equivalent of a Trust Deed is an Individual Voluntary Arrangement, or IVA.
You can’t set up a Trust Deed on your own, but the process is relatively simple.
Insolvency Practitioners are debt professionals who help set up and administer debt solutions. Your Insolvency Practitioner will act as the Trustee of your Trust Deed, helping draft your repayment proposal and handling monthly payments on your behalf.
Your IP will charge fees for their services, but they will be taken from your regular monthly payment over the course of the Trust Deed, so you won’t have to pay anything upfront.
Once you find an Insolvency Practitioner, they will explore your debts – in addition to your income and expenditure – and help you draft a repayment proposal.
That proposal will then be shared with your creditors, who will be given the chance to vote on whether they accept the terms of the Trust Deed. As long as a majority of your creditors vote in your favour, the Trust Deed will be approved.
If your proposal is approved by the majority of your creditors, you can officially start making monthly payments towards the arrangement.
Your payments will be taken at the same time each month and your Insolvency Practitioner will make sure they are divided fairly amongst your creditors. As long as you keep up with payments for the length of the arrangement, your remaining debt will be written off once the Trust Deed is complete.
A Trust Deed freezes interest and charges on your debts, and as long as you maintain your monthly payments
If you’ve done some research on Trust Deeds in Scotland, you may have heard the term ‘Protected Trust Deed’, which we’ll explain below.
The point of a Trust Deed is to give an individual the time and space they need to deal with their unsecured debts.
That cant’ happen if that individual is still being hassled by creditors for payment. That’s why Trust Deeds become ‘Protected’, which is the name given to the moment a Trust Deed becomes legally binding.
Once a Trust Deed becomes a Protected Trust Deed, any interest and charges on your debts will be frozen – making them easier to repay – and your creditors will no longer be able to pester you for payments or take legal action against you over unpaid debts.
When setting up your agreement, your IP will have sent your proposal to your creditors. Your creditors then have a period of 5 weeks within which they can raise objections to the arrangement.
Your Trust Deed will only become protected if:
Let’s say you owe £10,000 in debt to five creditors. As long as at least three of those creditors, or the creditors that account for at least £6,700 of your total debt, approve your arrangement, it will qualify for protection.
As long as you stick to the terms of your Trust Deed and make each monthly payment on time, your Trust Deed should be completed after four years, taking in a total of 48 monthly payments.
It is possible for a Trust Deed to last longer than four years, however this is uncommon and usually involves a material change in circumstances for the person involved.
While a Trust Deed allows you to avoid bankruptcy and able keep assets like your home and your car, you will be placed under financial constraints for the length of the arrangement.
While you are in a Trust Deed, you won’t be able to borrow money without the permission of your Insolvency Practitioner, and you will be expected to live on a relatively tight budget in order to pay the majority of your money towards your debts.
Even once your Trust Deed is complete, you might find it more difficult to do things like open a bank account or be accepted for lines of credit, but your situation will improve once the arrangement is complete and your unsecured debts have been cleared.
It’s likely that your credit score will already have been affected if you’re struggling with debt, but entering into a debt solution can also have an impact, so your Trust Deed may hurt your credit rating temporarily
If you get enter a Trust Deed or the Debt Arrangement Scheme, it will be recorded on a public register which can be found on the Accountant in Bankruptcy website. Credit reference agencies will include that information to your credit report, which will ultimately lower your credit score.
Your Trust Deed will remain on your credit file for six years from the date the arrangement starts, but once that time has passed, it will be removed from your file and you can begin the process of rebuilding your credit profile.
Avoid bankruptcy
Turn debts into single monthly payment
Freeze interest and charges
Stop hassle from creditors
Write off up to 81% of total debt
Restricts your monthly budget
Doesn't cover secured debts
Is subject to creditor approval
Recorded on a public register
Will impact your credit rating
If you owe money to multiple creditors, it’s hard to live with the uncertainty, especially if your creditors are putting pressure on you or even threatening legal action.
We can help. At Your Debt Expert, you have a team of debt specialists ready to listen to your situation, and find your the best debt repayment plan for your circumstances.
To find out more about Trust Deeds and other debt solutions, contact us for free debt advice today on 0800 082 8086.
Advice and support is also available at Money Helper.
*A debt write off amount of between 25% and 75% is realistic, however, the debt write off amount for each customer differs depending on their individual financial circumstances and is subject to the approval of their creditors. The example provided has been achieved by 10% of our IVA customers in the last 12 months.
Your Debt Expert is a trading style of Carrington Dean Group Limited. Carrington Dean Group Limited is authorised and regulated by the Financial Conduct Authority with firm reference number 674395.
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David Rankin, Katy Walker and Tracy Whittaker are authorised in the UK to act as Insolvency Practitioners by the Insolvency Practitioners Association.
** This Trustpilot account is for Creditfix Limited, the company that will administer IVAs. Your Debt Expert is a trading style of Carrington Dean Group Limited which is a member of the Creditfix Group
This website is in no way approved by the Government. The product (IVA) we administer through the group and process with our Insolvency Practitioners is covered under the following legislation: The Insolvency Act of 1986 (amended by the Insolvency Act 2000 and the Enterprise Act 2002) introduced a new procedure whereby a debtor could come to an arrangement with their creditors to pay their debts in full or in part over time as an alternative to bankruptcy. Our advisors will go through all your debt options including IVA (Individual Voluntary Arrangement) opportunities which are available for people living in England, Wales and Northern Ireland. Help can only be offered following an initial fact-finding process. An Individual Voluntary Arrangement (‘IVA’) is subject to the customer meeting qualifying criteria and gaining creditor acceptance. Initial advice is free and there is no obligation to proceed into an arrangement. Arrangement fees will be clearly explained to you in writing by your advisor.
