Trust Deed Explained - Help with Debt | Money Advisor

Outstanding debts can be a cause of constant stress and worry, especially when creditors begin using pressure tactics. According to an article published in the Journal of Psychological Medicine, about 50 percent of British adults with debt problems develop mental health issues.
Debt stress can be crippling, and it can have lasting effects on you but there are ways of proactively dealing with it. The first step is to take charge of your financial situation and study the debt management solutions available to you.
If you live in Scotland and have a growing debt problem, a protected trust deed might be the right option for you. So far, protected trust deeds have helped thousands of Scottish citizens manage their debts or get rid of them entirely.
In this piece, we will be discussing what Scottish trust deeds are and how they work, their advantages and disadvantages, and whether they are a good idea for you.
Let’s begin!

What is a Protected Trust Deed?

A protected trust deed (PTD), also known as a Scottish trust deed, is a legally binding, government-backed form of personal insolvency which was introduced in Scotland to reduce the financial burden on struggling debtors.
When you enter a protected trust deed, you pay a fixed sum of money to your creditors on a monthly basis. When a fixed period of time elapses, your remaining debts are simply written off, regardless of how much you have already paid.
A protected trust deed can only be arranged by a licence insolvency practitioner (IP). Insolvency practitioners are individuals who are certified and authorized to assist individuals, partnerships, and companies in formal insolvency procedures. Your IP will later act as your trustee.
It is worth mentioning that only residents of Scotland can apply for a protected trust deed. If you live in Northern Island, England or Wales, you might want to look into other such as

Which Debts Can Be Included in a PTD?

All your unsecured debts can be included in a protected trust deed. These include:
• Personal Loans
• Credit Card Loans
• Your Overdrafts
• Catalogues
• Store Cards
• Pay Day Loans
• Council Tax Arrears
• HMRC Overpaid Tax Credits
• Other HMRC debts such as VAT & NIC
• Overpayment of DWP Benefits
• Rent Arrears
• CSA Arrears, though you must pay for ongoing maintenance
• Car Parking Charges
• Shortfall on Mortgage
• Personal Guarantees

Which Debts Cannot Be Included in a PTD?

Protected trust deeds do not cover the following debts:
• Fines issued by the Court
• Student Loans
• Debts obtained through fraud
• Mortgages, secured loans, hire purchase and other loans secured on property, vehicles or furnishings
• Crisis loans from the Department of Work and Pensions’ (DWP) Social Fund

Protected Trust Deeds vs Unprotected Trust Deeds

A trust deed is called a ‘protected trust deed’ if most of your creditors agree with its terms. Protected trust deeds are binding on your creditors. This means that if you fulfill the terms of your trust deed, your creditors cannot take any legal action to recover their unpaid debt. They cannot seize your earnings or petition for your sequestration.
An unprotected trust deed is an informal arrangement that can be opted out of by you or your creditors at any time. Since an unprotected trust deed is not supported by a majority of your creditors, it is not binding. Your creditors can still go to court against you or reach out to you to demand payment.
A trust deed secures protected status if over half or one third (in value) of your creditors do not raise any objection to your trust deed proposal.

How Long Does A Protected Trust Deed Last?

Once set up, protected trust deeds typically last for a period of 3-4 years but some may last longer, depending on the amount of money owed and whether you own your house.
Protected trust deeds continue to show on your credit file for a longer duration of 6 years though.

How Does a Trust Deed Work?

Before you enter a protected trust deed arrangement, you should discuss your circumstances with a (Debt advisor). An experienced debt advisor guides you impartially and helps you decide whether trust deed is a good idea in your situation.
Once you enter a Scottish trust deed, you will be expected to pass all your possessions (including your belongings, property, and assets) to an expert insolvency practitioner, responsible for overlooking your finances.
Your appointed insolvency practitioner or trustee will then send all your creditors an undertaking stating that he would sell your assets to pay off the money owed to them. From this point onwards, your trustee will begin corresponding with your creditors on your behalf.
Next, your trustee will collaborate with you to prepare a trust deed proposal. They will then pitch this proposal to all your creditors and inquire whether they consent to your trust deed becoming protected.
If the creditors raise no objections, your trust deed will secure protected status and become binding. If you comply with your trustee and make regular payments towards your creditors, your debts will be waived after the trust deed expires.

Advantages of a Protected Trust Deed

Benefits of protected trust deed include:

Fixed Payment Term

Scottish Trust Deeds generally last for a duration of 48 months (4 years). If you have made regular repayments during this duration, you will be discharged from your remaining debt and be debt-free in a few years.

Pay What You Can Reasonably Afford

Payments highly depend on your financial situation. You only pay what you can reasonably afford to pay after your bills and living expenses have been deducted.

Remaining Debts Are Written Off

Assuming you have complied with all the conditions and made steady monthly payments for the total duration of your Scottish trust deed, the rest of your debt will be written off. This means that after 4 years, you will be able to start afresh.

Creditors Cannot Badger You Anymore

Once your trust deed becomes protected, it attains a legal status. This means that those of your creditors who ratified your trust deed proposal will not be able to contact you or pressurize you into making payments. In fact, they will be required to communicate with you through your trust deed provider.

You Get to Keep Your Assets

Unlike some of the other debt relief solutions like bankruptcy and sequestration, you will not be required to sell your assets (such as your home and car) to repay your debts.

Interest and Charges

If you stick to your agreed repayment plan, interest, as well as other charges on your unsecured debt, will be frozen; this means that your total accumulated debt will not increase.

No More Hidden Fees

Your trustee’s fees will be included in your monthly contributions. Apart from that, you will not have to deal with hidden fees.
Some trust deed providers might still charge you for the costs associated with setting up and negotiating a trust deed, though.


Scottish trust deeds are a rare example of formal debt solutions that are also flexible. Should your circumstances change, you can always apply for reduced (affordable) monthly payments.

Your Home

You will already know how any equity in your home will be handled when you draft your trust deed proposal. Generally, you can opt to get your trust deed extended for another year if you do not wish to or cannot afford to remortgage your house.

Continue to Trade

Compared to sequestration, protected trust deeds are more lenient. If you run your own business or are a sole trader, you can carry on trading. You may even be able to obtain small amounts of credit to run your business.

Disadvantages of a Protected Trust Deed

Disadvantages of a protected trust deed include:

Creditor’s Discretion

You need approval from your creditors for your trust deed to gain ‘protected’ status. Not all of your creditors have to agree with terms of the deed, but you need a clear majority. Objections from creditors only matter if they own one-third or more of your debt.

Credit Rating

Entering a protected trust deed would significantly lower your credit rating. This can make it difficult for you to obtain credit in the future. Your credit rating would start to improve after six years.

Covers Only Unsecured Debts

A Scottish Trust Deed only covers your unsecured debts. Any loans secured on your house or through hire purchase agreements are not covered.

Register of Insolvencies

The law requires that all trust deeds be recorded on a public insolvency register, also known as the register of insolvencies.

Asset equity

Your creditors may wish to utilize your assets for repayment. Unlike sequestration or bankruptcy, Scottish trust deeds do not require you to sell your property, but you may have to release its equity if it is large enough to help you repay your debt.
Equity is the amount of money you receive when you re-sell your asset. For example, if you own a high-value car, you might have to trade it in for a less expensive model and add the proceeds into your protected trust deed. In any case, you will still own a car.

Missed Payments

If you miss a payment and fail to inform your trustee about it pre-hand, your trust deed might fall apart. This means that your creditors can pursue you for sequestration.


A trust deed might affect your job, especially if you are working in a financial position.

Are Trust Deeds a Good Idea?

You are eligible for a protected trust deed if:
• You have been living in Scotland for the last 12 months or you have a place of business in Scotland.
• Your unsecured debts are more than £5,000
• You can afford to make regular payments using your disposable income throughout the term of your protected trust deed.
• You are insolvent and unable to repay your debts in full in under 4 years. This also means that your debt is more than your total assets.
• Your income is not coming solely through benefits and your non-benefit income is either equal to or more than your monthly repayment amount.
• You have not been bankrupt in the last 5 years.

It can be difficult deciding whether Scottish trust deeds are a good idea in your situation. That is why we recommend you discuss your circumstances with a qualified . Not only will they be able to answer your queries, but they can also examine your financial situation and suggest the perfect debt solution for you.

What Happens at the End of a Protected Trust Deed?

When your protected trust deed expires, your trustee will write you a ‘letter of discharge’. A copy of this letter of discharge will then be sent to Accountancy in Bankruptcy, which is Scotland’s Insolvency Service. After that, the Register of Insolvencies would record your discharge.
After your Scottish Trust Deed ends all the remaining unsecured debts, that were included in your protected deed, would be written off and you will not be required to make any more payments.

Alternatives to Protected Trust Deeds

The Scottish trust deed is not the only debt solution available to you in Scotland. Here are a few alternatives you may want to consider:

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