A Protected Trust Deed is a Scottish debt solution for people who can’t afford to meet their monthly contractual obligations to their debt.
What is a Trust Deed?
The trust deed option is only suitable for a small percentage of people with debt problems. The industry regulator is the Accountant in Bankruptcy. A licensed insolvency practitioner is required to administer the trust deed solution.
In a trust deed you are required to make one monthly payment to one company. All unsecured debt is included in the trust deed so you stop making your regular repayments to your debts. Interest and charges on each debt is included and written off at the end of the trust deed.
Who Can Enter A Trust Deed?
To be eligible for a PTD a person must:
- Owe at least £8,000 of unsecured debt, which they are struggling to repay.
- Be in employment
- And, have a disposable income each month to pay towards their debts.
It’s possible for somebody to enter a trust deed if they own a property, though if there is equity they will normally be asked to release this money. This is done by remortgaging or a third party pay out, though, in extreme cases the asset (usually a house) may have to be sold.
If you own a vehicle and enter a trust deed then the equity should not be over £3,000 at the end of the solution. If your car is on a finance agreement then it’s usually acceptable to keep paying this.
Quick Guide: Trust Deed
What’s the solution:
A trust deed is a proposal you make to your creditors via a licensed insolvency practitioner where you agree to make an affordable monthly payment towards your debt for a fixed period of time. You agree to offer any equity from your assets towards your trust deed. If your creditors accept your trust deed then it will become ‘protected’.
Once the solution ends, any debt which is not repaid is cleared and you are debt free again.
What are the benefits:
The benefits of a trust deed include
- Making one reasonable payment per month to your debt for a fixed period of time (usually 36 months).
- You won’t have to juggle finances and repayments to your debts each month.
- Once the trust deed is protected your creditors can no longer chase you for repayment. Instead they will get a percentage of the money recouped in the trust deed. The percentage works on a pro-rata basis.
- Once your trust deed solution is finished then any remaining debt, along with interest and charges, will be legally written off.
What are the negatives:
The negatives of a trust deed include
- You will have to adhere to your trustee’s demands in the trust deed.
- Your ability to borrow money whilst in the trust deed will be affected.
- Your credit rating will be affected with a default for 6 years.
- If there is already an arrestment on your wages then a trust deed will not be able to overrule this.
If you are currently struggling to repay your debt then it is best to seek debt advice to make sure you are aware of all debt solutions you may be applicable for. Read our tips on how to get good trust deed advice.