Scottish Trust and Protected Trust Deeds
The Scottish alternative to an IVA (Individual Voluntary Arrangement). It is a similar principle, but the procedures are totally different.
A Trust Deed is a document dealing with an individual’s financial affairs and is overseen by a Licensed Insolvency Practitioner - ‘the Trustee’. The Trustee acts as an honest broker between the debtor and his/her creditors to ensure the proposal being drafted is both realistic and fair to all parties concerned. Once completed, the debtor will receive a draft copy of the proposal for his/her approval. Any necessary alterations are then made before the Trustee sends a copy of the Trust Deed to each creditor.
What is a Protected Trust Deed?
When a Trust Deed is accepted by creditors it becomes 'protected'. This means creditors must stop further interest from accruing on the debts. At the end of the Trust Deed, as long as the debtor has adhered to all terms & payments, his/her debts are considered to be settled in full.
When would I consider proposing a Trust Deed?
- When simply making reduced payments on the debt would result in an unreasonably long repayment period.
- When Sequestration is considered too drastic a step and when a realistic proposal for payment can be made.
How long does a Trust Deed last?
Discharge is normally granted 3 years after the date of implementation.
Do I pay my creditors in full?
A Trust Deed is an agreement between you and your creditors for repayment of a specific amount of your debt. The Trustee will work out the value of your available assets or an agreed monthly contribution and make a proposal on your behalf to repay creditors. The return to creditors can vary from as little 10p in the pound to payment in full.
How do creditors accept or reject my Trust Deed?
The Trustee publishes a notice in the Edinburgh Gazette and writes to all the creditors advising them that the Trust Deed is to become ‘protected’. From the date of notification, creditors have a period of 5 weeks to accept or reject your proposal. If the Trustee receives more than 50% of creditors objecting in writing or one third in monetary value objecting, then the proposal will fail; but this is uncommon.
Once approved, all creditors are bound by the Trust Deed... and any creditors (including any that did not vote) cannot carry out any action against you for recovery of any debts.
What if I have joint debts with a partner?
As with an IVA, Trust Deed deals only with one individual’s liabilities. If there are joint liabilities with another person, then your creditors have the option of pursuing the other party for the remaining balance or full amount. This will not happen if the other person also successfully proposes a Trust Deed. ...
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