DebtOptions

What is a Trust Deed?

A Trust Deed is a legally binding debt repayment agreement between you and your creditors, created by a licensed Insolvency Practitioner (usually known as ‘the Trustee’). If you sign a Trust Deed, your assets pass to the Trustee for use in paying off your creditors. In some ways, Trust Deeds are the Scottish equivalent of IVAs.

Trust Deeds allow you to pay as much of your debts as possible, given your assets and your monthly disposable income (surplus income once essential expenses have been paid). Trust Deeds usually last around three years. Like IVAs, Trust Deeds help to take the pressure off debtors by allowing them to put in place a structured plan for repaying their debts. The Trustee deals with creditors on your behalf, so you no longer have to deal with them directly.

There are two types of Trust Deed: unprotected and protected. Most people opt for Protected, since they offer important benefits. The information on this site is mainly about Protected Trust Deeds.

Once the term of your deed is complete (usually three years), whatever remains of your debt is written off and you are free to start again, free of debt.

Trust Deeds versus bankruptcy

Setting up a Trust Deed is often a more attractive option than going into bankruptcy and having to give up all your assets to repay your debts. Setting up a deed is usually more flexible and less expensive than the bankruptcy process. There is no court involvement in setting up a Trust Deed, but it is still a legally binding agreement that you must adhere to. It is important to consider your position very carefully before you commit to a deed of this type.

Protected Trust Deeds

SSome deeds are registered as ‘protected’. If your case meets certain criteria, your deed can become a Protected Trust Deed. Most people opt for the deed to be protected, because of the additional benefits that it offers. However, all deeds start out as unprotected.

If your Trust Deed is protected, interest is frozen on the outstanding amount of your debt and no more charges can be made. Creditors must not contact you for the term of the agreement, and they cannot start bankruptcy proceedings against you. If your deed is unprotected, only creditors who have agreed to it are bound by its terms.

For your part, you agree to co-operate with the Trustee, pay the monthly amount agreed, not take on any further credit and let the Trustee know of any change in your financial circumstances. If you have a Protected Trust Deed, you can still hold certain public offices, continue as self-employed or continue to serve as the director of a company. If you go bankrupt, these options may be closed off to you.

A Trust Deed can be a great way to lay the foundations of a debt-free life. To learn more about the benefits contact Debt Options, apply online or call us on 0800 234 3605 to discuss the options.