Protected trust deed

A protected trust deed is a legally binding arrangement in Scotland where you make reduced payments over 4 years. At the end of this time, your unsecured debts are usually written off.

A trust deed is a form of insolvency, so your unsecured debts need to outweigh the value of your assets, such as a house or vehicles. Unsecured debts include things like credit card debt, personal loans and store cards.

Trust deeds are only available if you live in Scotland. If you live in England, Wales or Northern Ireland, an Individual voluntary arrangement (IVA) is a similar solution, but it’s important to note that it has different benefits, risks and fees associated with it.

Benefits of trust deeds

• With the help of an Insolvency Practitioner (IP) you arrange repayments to your creditors over 4 years. After this any remaining debt is written off
• Once your trust deed is approved, your creditors won’t chase you for payment or add more interest and charges to your debts, and they can’t take any court action
• While you may have to sell some assets, you’re usually able to keep one essential vehicle worth less than £3,000 
• Although a protected trust deed is a formal debt solution, you don't need to appear in court

Risks of trust deeds

• An Insolvency Practitioner normally takes a charge for their service out of your monthly repayment for your trust deed, so it’s important you understand what percentage this will be
• A trust deed may affect the terms of your employment; if you're concerned about this you should check your contract or speak to your HR department
• There's the risk of bankruptcy if your trust deed fails
• Your credit rating will be affected for six years, starting from the date the arrangement is agreed

Other important things to consider with protected trust deeds

Before you make a decision on whether or not to enter into a trust deed there are a number of considerations to think about, including:

• A trust deed is a legally binding agreement between you and your creditors
• Provided you comply with the terms of your protected trust deed, your creditors can’t take further action to recover the money you owe or make you bankrupt
• You’ll need to check if it’ll affect your job. A trust deed is a form of insolvency and having one can lead to disciplinary action or dismissal in some jobs, such as those in financial services or the legal profession
• If you're granted a trust deed and you rent your property your landlord may terminate your tenancy agreement
• If you’re a homeowner you may have to release equity from your property
• You’ll have to pay any surplus income you have, after your essential living costs are paid, into your trust deed for four years
• You must inform the trustee if your personal or financial situation changes, for example if you inherit some money, or you lose your job
• Only the debts included in your trust deed will be written off at the end of it. If the trust deed fails, there’s a risk of bankruptcy
• You’ll have to pay a fee for the services of the insolvency practitioner running the trust deed. This fee is normally deducted from your payments.

How will a trust deed affect me?

A trust deed should be carefully considered because of the possible consequences for your personal, professional and financial life. These include the following:

• You'll have to keep to a budget for the full term of your trust deed: usually 4 years
• In addition to your employment, a trust deed can also affect any hire purchase agreements you might have
• Your details will also be added to a public register, called the Register of Insolvencies (ROI), for a period of five years. The register is maintained by the Accountant in Bankruptcy (AiB) and is available for viewing by the general public. It contains all details of current protected trust deeds
• There will be restrictions on your spending during your trust deed. You’ll have to stick carefully to a budget to ensure you can afford the monthly payments
• There is a charge for the services of an insolvency practitioner, but the fees are deducted from the trust deed fund. This is the total amount of money you are able to offer your creditors and is made up of your monthly payment (over the agreed term) and any assets or equity included.

Common trust deed questions