Scottish Debt Solution
Protected Trust Deed
A Protected Trust Deed is a formal, legally binding agreement between you and your creditors. It typically lasts four years, after which any remaining unsecured debt is written off.
What is a Protected Trust Deed?
A Trust Deed is a voluntary arrangement available only in Scotland. It’s a formal agreement where you make affordable monthly payments towards your debts for a fixed period, typically four years. At the end of that period, any remaining debt included in the agreement is written off.
The “Protected” part means your creditors can’t take further action against you for the debts included in the Trust Deed – they can’t pursue you for payment, add interest, or take you to court.
Key benefits
- Fixed monthly payment based on what you can afford
- Legal protection from creditors
- Interest and charges frozen
- Remaining debt written off after completion
- Usually complete within 4 years
Am I eligible?
To qualify for a Protected Trust Deed, you generally need to meet certain criteria. While the specifics can vary, the basic requirements include:
- Be a Scottish resident (or have a connection to Scotland)
- Owe a minimum amount of unsecured debt
- Have some disposable income after essential expenses
- Be unable to repay your debts within a reasonable timeframe
The exact thresholds and requirements can change, so it’s important to speak with a licensed Insolvency Practitioner who can assess your specific situation.
How does it work?
1. Assessment
A licensed Insolvency Practitioner will review your income, expenses, debts, and assets using the Common Financial Tool. This determines how much you can afford to pay each month.
2. Proposal
Your Insolvency Practitioner prepares a Trust Deed proposal and sends it to your creditors. They have five weeks to respond.
3. Protection
If creditors holding the majority of your debt agree (or don’t object), the Trust Deed becomes “Protected” and is registered with the Accountant in Bankruptcy.
4. Payments
You make agreed monthly payments to your Trustee, who distributes funds to creditors. This typically continues for four years.
5. Completion
After completing your payments, any remaining debt included in the Trust Deed is written off. You receive a discharge certificate.
Important considerations
A Protected Trust Deed is a serious financial commitment that will affect your credit rating for six years. If you’re a homeowner, there may be implications for your property. It’s essential to get proper advice before proceeding.
What debts are included?
A Protected Trust Deed covers most unsecured debts, including:
- Credit cards and store cards
- Personal loans and overdrafts
- Council tax arrears
- Some HMRC debts
- Catalogue debts
- Payday loans
Secured debts (like mortgages), student loans, court fines, and child maintenance are generally not included.
Is it right for me?
A Protected Trust Deed can be a good option if you have significant unsecured debt and can afford regular payments but couldn’t realistically clear your debts within a reasonable time. However, it’s not suitable for everyone.
Other options like the Debt Arrangement Scheme (DAS) or Sequestration might be more appropriate depending on your circumstances. The best way to find out is to speak with a qualified professional who can look at your specific situation.