Trust Deeds

Sometimes refereed to as the Scottish IVA, a Trust Deed is a similar debt solution exclusively for Scottish residents.

Trust Deeds allow Scottish residents with unaffordable debts to clear them at an affordable rate and avoid Sequestration, the Scottish equivalent of bankruptcy.

How a Trust Deed works

Firstly, you'll need to speak to one of our Trust Deed advisors who will help you to compile a list of all of your creditors, how much you owe them and the amount you can realistically pay towards your debt each month.

A Trustee will now put a proposal to your lenders and administer the Trust Deed. In much the same way as an IVA, a Protected Trust Deed will stop your creditors from taking legal action and ensure the interest and any charges on your debt are frozen.

Points to consider:

• Two thirds of your creditors have to agree to your Trust Deed.
• A Trust Deed precludes you from entering into any other debt contract.
• Any change in your financial circumstances, like an unexpected windfall, should be reported to the trustee.
• You must meet your agreed monthly payments.

Advantages of a Trust Deed over Sequestration:

• All correspondence with your creditors is handled by the trustee.
• It costs far less than Sequestration, the Scottish equivalent of bankruptcy.
• Creditors are prohibited from adding any further charges or taking further action against you.
• Company directors and self-employed people can carry on as before.
• Any remaining debt is written off after the three-year term.
• A Trust Deed is totally private, so no information will be published.

Trust Deed Fees

A Trust Deed typically lasts for three years, and you will pay a flat monthly fee. Below is an illustration showing the typical payments and fees, inclusive of VAT, based on a client owing an average of £23,000, completing the Trust Deed in three years and having no equity in their home:

• Monthly payments (over 36 months) £200
• Fee included in your monthly payment (over 36 months)   £130
• Trustee disbursements    £150
• Total repaid by individual (including fees)    £7,200
• Total unsecured debt written off   £15,800 (69%)

The fee is deducted from your monthly payments so makes no impact on the total you're required to pay. The amount you pay is based on the amount you can afford after essential expenditure has been accounted for, and on the value of your assets.

Your monthly payment will be stored in a 'creditors' pot' where your fees will be deducted before your creditors receive their payment.

Your creditors will be aware at the start of the proposal what the calculated fees are, as they are presented before the proposal is agreed. Unless a percentage of your creditors object to the terms in the proposal, it will become protected by law.

The fee covers the Trust Deed set-up cost as well as the ongoing management, such as your Relationship Manager who handles the day-to-day running and can answer any queries during the term of your Trust Deed.

It is important that you keep up your Trust Deed repayments; failure means you'd be liable for the outstanding balance and the costs that have been acquired. You may be granted a short break from payments, such as if you are facing unexpected costs or, if your circumstances changes, such as a drop in income, you may be able to change the Trust Deed terms (variation). Always contact your IP before if you have any problems making payments.