Trust Deed & Protected Trust Deed (PTD)

A debt relief solution that can be carried out in Scotland. It is a legally binding agreement that usually lasts four years between the debtor and all creditors. For a Trust Deed to become legally binding (Protected Trust Deed), creditors must agree to the proposal. If some but not all agree, the remaining creditors may still act such as applying to make you bankrupt.

A PTD can be prepared only by a licensed trustee, the so-called Insolvency Practitioner (IP) acting as a trustee. The agreement consists in the fact that the trustee will set a monthly amount that you could reasonably pay your creditors after deducting all bills and expenses. The amount of the cancelled debt depends on your personal circumstances. 

All interest and additional fees are retained. You also do not have to sell your home or car and your creditors cannot continue to collect debt from you. After joining the Trust Deed, you must regularly pay back to the trustee the designated amount. After accepting the Trust Deed, the trustee collects his or her margin for running the case, which is always included in the monthly instalment. It is important to be aware that if you deliberately break the Trust Deed, the trustee's margin will not be refunded.
 

Criteria for a PTD

  • You must have a minimum disposable income (amount determined by your Insolvency Practitioner)
  • You must have a minimum debt level of £5,000
  • You must have no less than two creditors 
  • You are unable to satisfy your current debts

Advantages

  • Trust Deed allows you to repay as much of your unsecured debt as you can over a typical 48-month period, which could mean a portion of the debt is written off
  • You can keep your house (although you will have to release any equity to help pay your debts)
  • Interest and charges are stopped on any debts included in the arrangement
  • Your creditors are legally prohibited from taking any further enforcement action such as petitioning for your bankruptcy
  • You are not legally stopped from borrowing money (obtaining credit) such as a mortgage or credit card, however this may be difficult in practice 

Disadvantages

  • You must keep up payments for four years or risk bankruptcy (any fees you have paid up to that point will not be recoverable)
  • You must release any equity in your house to help repay debts
  • The assigned IP will take a charge for their service, taken from the monthly payments. Therefore, it is wise for the individual to shop around and find the best option.
  • The Trust Deed may affect your credit rating for a period of six years from the date the Trust Deed begins. Your credit score may fall to 0 or it may cause inability to borrow during the time the Trust Deed is in place.
  • Trust Deed may affect an individual’s terms of employment. It may also impact an individual’s ability to retain a rental property due to possible termination of the tenancy agreement.

Which debts can be included within a PTD?

  • Unsecured debts such as:
  • Overdrafts
  • Credit cards 
  • Bank loans 
  • Store cards and catalogues 
  • Rent arrears 
  • Car parking charges 
  • Overpaid Tax Credits due to HMRC
  • Payday loans 
  • Overpayment of DWP benefits 

Which debts cannot be included within a PTD?

  • Fines, penalties, compensation, forfeiture orders imposed by court
  • Debts incurred through fraud 
  • Student loans 
  • Maintenance under court order
  • Secured debts 

Considerations

  • A PTD can affect any hire purchase agreement you may have 
  • Your details will be added to a public register – the Register of Insolvencies (ROI) for five years 
  • Your spending ability will be restricted. You will have to stick to a budget to ensure you can afford your monthly payments 
  • The Insolvency Practitioner will be paid fees, at no additional charge. This is factored into your monthly contributions 

PTD Procedure

  • If you are suitable for a Trust Deed, you will be assigned a trustee. Your trustee will go over the terms and agreement of the arrangement to ensure you are 100% satisfied with the terms. 
  • Upon signing the Trust Deed, your trustee will then make the proposal, on your behalf, to your creditors. The trustee will advise your creditors of your income and expenditure, including how much you can realistically afford to pay each month. 
  • Your Trust Deed is then registered with an Accountant in Bankruptcy (AIB) website, where your creditors can access it.
  • Your creditors are sent the proposal within seven days and are given five weeks to review the proposal and either accept or reject the terms. The creditors at this stage will inform the trustee and not contact you directly.
  • If the majority of creditors accept the proposal, the Trust Deed will gain protected status. If creditors fail to respond, it is believed they have agreed to the proposal. 
  • Once your Trust Deed is registered as protected (Protected Trust Deed), your creditors can no longer take legal action against you to recover your debts and any interest and charges on your applicable debts are frozen. 
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