What is a Trust Deed ?
A Trust Deed is similar to an IVA, but is used in Scotland. A Trust Deed is a formal agreement between you and your creditors. It passes your assets and property to a Trustee to be administered for the benefit of creditors and the payment of debts.
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Sequestration is the Scottish law version of Bankruptcy. This not the only solution for serious debt problems.
Advantages of a Trust Deed over Sequestration
- Debts are frozen at the date you sign the Trust Deed. Creditors should direct correspondence to the Trustee rather than you.
- You can still have a bank account. This is usually an instant access type account where you can use a cash card but no cheque book, cheque card or overdraft facility. We have a list of instant access bank accounts that may be suitable.
- Any monthly payment based on your earnings may be increased or decreased if your circumstances change.
Restrictions of a Trust Deed
- You cannot take out credit over £250 during the Trust Deed period.
- Only the creditors who agree to the terms are bound by the Trust Deed. Those not agreeing can still carry out various forms of enforcement available to them, including petitioning for your bankruptcy.
- If you do not cooperate with the Trustee, they can try to make you bankrupt
- You cannot be a director of a limited company.
The Trustee must be a qualified Insolvency Practitioner.
Protected Trust Deed
Providing it meets certain conditions, a Trust Deed may be recorded in the Register of Insolvencies as a Protected Trust Deed. This prevents the creditor from making you bankrupt so long you stick to the terms of the Trust Deed.
Frequently Asked Questions.
Are the creditors bound by the terms of the trust deed?
No, only those creditors who agree to its terms.
Can those creditors who do not agree to the trust deed take action to recover their debts?
Yes, they can still carry out the various form of diligence available to them, including petitioning for your sequestration.
Can I prevent diligence being taken against me by creditors who do not agree to the trust deed?
Yes, by having the trust deed registered as a protected trust deed.
How does a trust deed become a protected trust deed?
The trustee publishes a notice in the Edinburgh Gazette and writes to all the creditors enclosing a copy of the notice and of the trust deed and advising them that the trust deed is to become protected. Unless, within 5 weeks of the date of the notice, written objections are made by a majority in number of creditors, or from creditors representing not less than one third of the total debts, the trust deed automatically becomes protected.
Who pays for the costs of setting up and administering the trust deed?
All costs must be met from the estate transferred by the trust deed or from your earnings.
How much must I owe before a trust deed can be signed?
There is no minimum or maximum amount of debt.
Are the terms of the trust deed prescribed by law?
No, the trust deed can contain any terms, which are likely to be acceptable to the creditors, and it is possible to enter into a trust deed, which does not transfer all of the assets, but such a trust deed cannot become a protected trust deed and may not be acceptable to all the creditors. However, if the trust deed is to become a protected trust deed, it must transfer everything the debtor owns except household goods and current income. There are standard forms of trust deed commonly in use, which meet the requirements for a protected trust deed.
Once the trust deed has been signed, what further obligations do I have to the trustee or to my creditors?
You must co-operate with the trustee and comply with the terms of the trust deed. You may be required to make a contribution to the estate from your earnings. The trustee will deal with your creditors.
What can happen if I fail to co-operate with my trustee?
The trustee can petition for your sequestration. The trustee can also petitionfor your sequestration if he considers that would be in the better interests of your creditors, for example, by obtaining the greater statutory powers available to a trustee in sequestration.
Is it possible for me to sign a trust deed even if I have no assets?
Yes, if you are prepared to pay a proportion of your earnings to the trustee; there must however be some benefit to your creditors.
What happens if a majority of my creditors object to my trust deed becoming protected?
Provided you owe at least £1,500 and have not been sequestrated in the previous 5 years, the rejection by the creditors of a trust deed which was eligible to become a protected trust deed would be sufficient grounds for you to petition for your own sequestration, if you so wished. See also booklets AB1 and AB2. The fact that you have signed a trust deed would also entitle any creditor, or creditors, to whom you owe not less than £1,500, to petition for your sequestration in the 5 week period before the trust deed becomes protected. If however it is not superseded by your sequestration, a trust deed will continue to operate even if it does not become a protected trust deed.
When will I be discharged from my debts?
Provisions for your discharge will usually be included in the terms of the trust deed and is normally allowed 3 years after the date of granting. If the trust deed becomes protected, your discharge will be binding on all of your creditors. If the trust deed does not become protected, your discharge will only be binding on those creditors who agreed to it and they would still be able to pursue you for repayment.
Does all my property have to be transferred to the trustee?
Yes, but only if the trust deed is intended to become a protected trust deed; otherwise it is possible to withhold some of your assets. Such an arrangement may not however be acceptable you your creditors. Property which is transferred to the trustee may be sold by him whenever it is in the interest of your creditors for him to do so.
Can the trustee sell my house?
The trustee can sell all property which has been transferred to him by the trust deed; however, if your house is jointly owned or if it is a family home, the trustee will need the consent of the co-owner of anyone else who has occupancy rights in the house.
Can I hold other public offices?
Yes; however, the regulations governing some public bodies debar from holding office anyone who has signed a trust deed or entered into an arrangement with his creditors; you should check with the body concerned.
Will the signing of a trust deed result in my being black-listed by credit reference agencies?
Yes, if the trust deed becomes protected because it will have been advertised in the Edinburgh Gazette. In other cases the agencies may become aware of your insolvency from other sources, e.g. from your creditors.
When I am discharged, do I get my property back?
No. Once you have transferred assets to your trustee, it becomes his duty in law to sell them for the benefit of your creditors. The trust deed continues to operate after your own discharge so long as there are assets for the trustee to manage or realise.
Bankruptcy Alternatives
Debts over £15K ? An IVA maybe the solution for you. upto 70% of all Debts written off.
Bad Credit Loans
Specialists in helping UK residents who have been refused a loan elsewhere.
Home Owner Loans UK
Experts in finding UK Homeowners the best Secured Loan or Remortgage.
See Also Abacus Debt Advice- Debt Consolidation Firm
This material is for general information and only constitutes advice in the broadest of terms. You should not rely on this information to make any decisions. Call our advisors on 0800 043 2444 for professional advice for your own particular situation.