What is a Protected Trust Deed?
A Protected Trust Deed is a formal, Government backed arrangement, available to residents of Scotland, that is legally binding on all of your unsecured creditors.
In return for paying what you can reasonably afford each month (after living costs and priority expenditure have been accounted for), for 4 years (typically), you will be discharged from any outstanding liabilities included in the arrangement on completion.
If you have assets such as a property, your Trustee will also look to release any available equity through remortgage, or if you are unable to remortgage, by selling your home (even if you own the property jointly and the joint owner(s) don’t agree to the sale, your Trustee can go to court to get a division and sale order in order to release your share of the equity). You will have any assets not disposed of returned to you at the conclusion of the Trust Deed.
As long as less than one third of your creditors (by value of debt) or a minority of creditors (by number) object to the arrangement, the Trust Deed will become protected, which means your creditors are prevented from taking any further action against you, including, pursuing you for the debt or making you bankrupt (it does not stop any existing diligence). It also prevents you from declaring yourself bankrupt or from entering the Debt Arrangement Scheme. If you incur new debts after signing the Protected Trust Deed then those creditors will not be bound by it and can take further action. Your Trust Deed will be entered into the Register of Insolvencies, which is publicly available.
You should also be aware that even if your Trust Deed has been granted protected status, your Trustee (or your creditors) can still petition for your sequestration at any point (including at discharge) if they can prove sequestration will return more back to the creditors.
Debt Advice Foundation is a registered UK charity offering free, confidential debt advice. If you need advice about Scottish Trust Deeds or would like to see if you qualify, please call the charity’s helpline to speak with a Advisor on 0800 043 40 50.