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How does a Scottish Trust Deed work?

A Trust Deed is a legally binding agreement between you and your creditors, created by a Trustee. Your assets pass to the Trustee for use in paying off your creditors. The Trustee deals with creditors on your behalf, so you no longer have to deal with them directly. Trust Deeds allow you to pay as much of your debts as possible, given your assets and your monthly disposable income.

Your Trust Deed is put to your creditors in the form of a proposal that they then vote on. Often, creditors agree because they will get more money back than if you were declared bankrupt. Once the term of your Trust Deed is complete (usually three years), whatever remains of your debt is written off and you are free to start again, free of debt.

Are Trust Deeds the same as IVAs?

Broadly speaking, Trust Deeds are the Scottish equivalent of IVAs, although there are some important differences.

Are Trust Deeds the same as bankruptcy?

No, because your assets are not taken into trust (sequestered). If you go bankrupt, all your assets are used to pay your debts. With a Trust Deed, you agree to pay back a certain amount of your debt each month.

Who can apply?

Trust Deeds are available to individuals, sole traders and partners facing financial difficulties in Scotland, and are likely to be most useful for people with unsecured debts that they cannot afford to pay.

How long do the deeds last?

Protected Trust Deeds usually last for three years at most. Some may not last as long as this, since they are tailored to individuals’ own circumstances.

Why should my creditors agree to my Trust Deed?

With Trust Deeds, creditors only recover part of the total amount they are owed. However, this may still be more than they would get if you were declared bankrupt. Also, bankruptcy is a long and expensive process. So a Trust Deed may be the best bet from your creditors’ point of view.

What debts can be included?

Debts to banks, credit or store cards, finance companies, government departments and amounts owed to family and friends can all be included. However, mortgages, student loans, hire purchase, fines or arrears with maintenance or child support cannot be covered by your Trust Deed.

Will I lose my house?

No, but if you have equity in your home you may have to release and use some of it to pay your creditors.

Can I still work, run a business or be a company director?

Yes. Unlike bankruptcy, a Trust Deed places no restrictions on your employment. If you run a business or act as a director, you will not have to give up your role.