Trust Deeds – The Basics
A Trust Deed is a voluntary but legally binding agreement between you and your creditors where you agree to pay back an affordable portion of what you owe. It allows you to make affordable payments towards your debt for a minimum term of 48 months. You’ll receive some debt forgiveness and some of your debt will be written off.
When you enter into a Trust Deed, you consolidate your total debts together and you’ll make one monthly payment towards them all. The amount you pay is based on what you can reasonably afford and is therefore usually, significantly lower.
A Trust Deed can only be arranged and administered by a Licensed Insolvency Practitioner who will take on the role of ‘Trustee’. It’s their job to help you repay your debts in the duration of your Trust Deed – typically 4 years. At the end of this time, any remaining, qualifying, unsecured debts will be written off. Legally, your creditors can no longer pursue you for the remaining amount leaving you debt-free.
A Protected Trust Deed is the status your Trust Deed gains when most of your creditors agree to the terms and the AiB has approved it.
After your Trust Deed is registered, your biggest creditors have the opportunity to object (creditors with over 33% of your debt). If after five weeks, they haven’t objected your Trust Deed can go in front of the AiB for approval. The AIB or ‘Accountant in Bankruptcy’ is Scotland’s Insolvency Service.
Getting your Trust Deed approved gives you legal protection from your creditors – as long as you stick to the terms of the Trust Deed, your creditors can’t take further action to pursue your debt. A Protected Trust Deed also protects you from bankruptcy, although your Trustee or creditors can still petition for it if you break the terms of the Trust Deed.
If your biggest creditors don’t agree to your Trust Deed, it’s not ‘Protected’ and therefore not legally binding.