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The Protected Trust Deed is a Scottish legal arrangement between a debtor (someone who owes money) and a Trustee (someone appointed to manage those assets in a trust) where the debtor transfers all their assets to be managed by the Trustee for the benefits of the creditors (the people or organisations that are owed the money). If this Trust Deed meets certain criteria, then it will be recorded in the Register of Insolvencies as 'protected'. This will then protect the debtor from being taken to court by the creditors. A Scottish Protected Trust Deed, unlike sequestration/bankruptcy is only made "public " through the Edinburgh Gazette.
In some instances, a Protected Trust Deed is the right option when there are insufficient funds to pay all the creditors. The appointment of a Trustee allows him/her to agree a repayment programme with the creditors. If a third in value of the unsecured creditors approve the arrangement, then the plan is put into place and the debtor makes payments as agreed under the terms of the Deed. Setting up a Protected Trust Deed can be achieved within 6 weeks, if all parties agree. They usually have a term of 3 years, but can be for any sensible, agreed period. At the end of the Trust Deed, all outstanding debts are written off.
Since the largest asset most people will own is their house, any equity (the value of the property less any amount of mortgage owed) in the property will be brought into the terms of the Trust Deed. It may be necessary to release some or all of this equity (usually through remortgaging the property or agreeing a longer payback period) and the funds released used to help pay off some or all of the creditors. If the house is jointly owned, then the respective interests will be taken into account when considering how much equity can be released when looking at the total debt obligations under the Trust Deed.
Therefore, it is usually possible to put together an agreed programme of repayments on the debt that creditors will accept. If circumstances change, either for the better or worse, the Trustee must be informed and changes will be made to the payment schedule in the Trust Deed.
Entering into a Trust Deed is not something to be done lightly. There are alternatives which should be considered, such as a debt management plan. There are serious financial implications to entering into such a Deed but it is usually possible to emerge from such an arrangement without losing your house.
It is important that you get proper and approved advice. You should contact a qualified Insolvency Practitioner who is a legally approved advisor obliged to provide clear information on alternatives and written materials to explain the options. You can also contact the Citizens Advice Scotland or Local Authority money advisors %u2013 both of whom will be able to guide you as to where to start the process.
The alternative in England, Northern Ireland and Wales there is called an Individual Voluntary Arrangement (IVA). Remember if you have any questions about anything above you can post in our debt forum.
