It will affect your credit rating
A Scottish Trust Deed will affect your credit rating. Unfortunately, there’s no way to avoid this, although it’s likely your credit record is already being affected if you’ve missed payments on your debts. You may also struggle to source credit during the period of your PTD and there are restrictions on obtaining credit, as well.
Your lenders can also choose not to approve your PTD.
You may have to sell or remortgage
Granting a Trust Deed could mean that your house may be sold and you might have to move home, unless it’s excluded under the legislation or you can make alternative arrangements. The exclusion terms are quite complicated and are set out in section 2.8 of the Accountant in Bankruptcy’s Trust Deed Guidance, but they generally apply only to your main residence if it has little or no equity. However, even if your property isn’t excluded you may be able to agree to make additional payments into your Trust Deed in lieu of the equity or arrange for a remortgage (remortgaging may attract higher interest rates and if no remortgage is available the period may be extended) or third party contribution to pay for any equity within your home, so you have several options to avoid having to sell.
More information of how Trust Deeds can affect your property can be found here. A Scottish Trust Deed may also require you to sell high value items to raise funds to pay your creditors. You won’t be expected to sell basic household items such as your TV or computer and you can keep your car if you need it for work and family purposes. The only exception to this is if the car is high value; you may then be expected to downsize to something less expensive. If you pay into a pension, you may be required to reduce your payments or stop making payments until the Scottish Trust Deed is complete.
Only unsecured debts are covered
Only unsecured debts are covered by a Scottish Trust Deed, so any loans secured on your home or through hire purchase agreements aren’t covered.
It will be advertised
When you grant your Scottish Trust Deed, it’ll be recorded on the Register of Insolvencies, which is a public record.
Don’t miss a payment
If you fail to make a payment under your Scottish Trust Deed agreement without first contacting your Trustee for discussion and permission, you may find the Trust Deed could fail and you won’t then be discharged from your debts. It’s sometimes possible to arrange payment holidays, or to extend the timeframe of the Scottish Trust Deed in exceptional circumstances, so it’s important you let your Trustee know as soon as you think you might not be able to make a payment. If your Trust Deed does fail, you risk being made bankrupt.
Don’t take out more debt
If you run up any new debts, in addition to those within your agreement, your new creditors will be able to pursue you for your new debts. Your existing Scottish Trust Deed doesn’t cover debts incurred outside the agreement. This is why it’s extremely important for you to declare all of your debts to your Trustee at the beginning.
Also, it’s important to note that there are restrictions on the expenditure of a person who enters into a PTD.
Scottish Trust Deed FAQs
Who can apply?
A Scottish Trust Deed, or PTD, could be an option for you if you live in Scotland, have £5,000 or more of unsecured debt and can’t repay it in full within 4 years. You can’t apply for a joint Trust Deed, or apply for one if you’ve been sequestrated and not yet discharged. The following people can sign a Trust Deed:
- A living individual.
- A partnership.
- A limited partnership (within the meaning of the Limited Partnerships Act 1907(6)).
- A trust, a corporate body.
- An unincorporated body of persons.
What debts are included?
A Protected Trust Deed covers all your unsecured debts with a few exceptions:
- Student loans.
- Court fines.
- Debts incurred as a result of fraud or breach of trust.
- Obligation to pay aliment (e.g. child support).
- Periodical payments to an ex-spouse as ordered by a sheriff.
- Only unsecured debts included within the Individual Voluntary Arrangement or protected trust deed may be discharged at the end of the period and unsecured debts not included remain outstanding.
How do I apply?
Call us on 0141 816 0394 or Complete The Eligibility Form now.
Find out if you qualify
It’s important you speak to our dedicated team to fully understand and assess each of your options.
A PTD isn’t the only method of addressing your debts and you should be happy it’s the best option for you before proceeding.
When you speak to us we’ll take time to establish who you owe money to, how much you can afford to pay, and what your assets are worth. We’ll then discuss the implications of each of the formal and informal options available to you.
How does a trust deed become protected?
Shortly after signing your Scottish Trust Deed, your Trust Deed company will place a notice of your Trust Deed in the Register of Insolvencies. They’ll also write to all your known creditors, who are then given a period of 5 weeks to object to your Trust Deed proposal.
Your appointed Trustee works closely with your creditors and their representatives. We’ll be able to recommend, from the outset of your Trust Deed, whether your creditors are likely to object.
Assuming a sufficient number of creditors agree to the Trust Deed, it’ll become a Protected Trust Deed and will be updated on the Register of Insolvencies accordingly.
What is a 'Protected' Trust Deed?
Once your Trust Deed becomes a Protected Trust Deed, this means that your creditors are bound by the terms of the Trust Deed and can take no further action against you to recover their debt.
Once you’ve completed your Trust Deed, you’ll no longer be liable for the debts included within it. Your Trustee will deal with your creditors from the point you sign your Trust Deed, and, if you receive any contact from your creditors, you can simply refer them to your Trustee.
Payments into the Trust Deed and fees
Each individual Trust Deed is different so this all depends on your personal circumstances. Repayments are calculated by using the Common Financial Tool (CFT). The CFT is designed to provide sufficient allowance for you to meet your living expenses and for you to pay only what is deemed to be affordable to your debts.
However there’s generally a minimum repayment level and if your remaining (disposable) income (after your living expenses are accounted for) is too low the, creditors or the Accountant in Bankruptcy can prevent the Trust Deed from becoming protected.
The Trustees’ fees are met from the payments made into the Trust Deed and you won’t be required to pay any additional fees. The fees are based on a standard set fee and a percentage of the realisations. The percentage ranges between 15 & 20% and the standard fee ranges from £1,000 to £2,000.
Bank account - can I still have one?
Yes, however we would always recommend, where possible, to have a bank account with a bank you don’t owe money to. We’ll let you know if this is needed in your case and help you to do this before you sign your Trust Deed.
Credit file - how does it affect it?
Your credit file will be updated to show that you’ve signed a Trust Deed and this information will remain on your credit file for a period of time, however, once discharged from your Trust Deed, you can obtain a certificate of discharge which you can then register with credit reference agencies to allow you to rebuild your credit rating.
Employment - how does it affect it?
In most cases people can sign a Trust Deed without any impact on their employment, but it’s always advisable to check your contract of employment or speak to your HR manager/department.
What if I'm self-employed?
If you’re Self Employed, you’re still eligible for a Trust Deed. Many Self Employed people enter into Trust Deeds and can still carry on with their trades.
Completion of the Trust Deed - what happens after?
After the 48 month period (or otherwise agreed timescale) is over, you’re legally discharged from your debts. You’ll receive a certificate of discharge from your Trustee and your credit file will show you’ve completed your Trust Deed, this is when you can start to rebuild your credit rating.