Personal insolvency in Scotland ClearDebt - Clear debts and have a debt free future with an IVA from ClearDebt

Personal insolvency in Scotland

The IVA and Bankruptcy information provided on this website relates to legal insolvency options that are available to residents of England and Wales. There are, however, similar options available only to residents of Scotland.

A trust deed is a legally binding voluntary arrangement (similar to the Individual Voluntary Arrangement “IVA”). It is a procedure whereby you repay your creditors over a specified period of time. It provides debtors with an alternative to sequestration (bankruptcy in England and Wales).

There are two types of trust deed:

a trust deed (known sometimes as an unprotected trust deed)
a protected trust deed.

ClearDebt currently operates in England and Wales. However, you can still follow our process as the recommendations may still be appropriate. We can then if you request refer you to a Scottish insolvency practitioner who will be able to offer you full and immediate advice.

What is a Trust Deed?
A Trust Deed is a formal arrangement, used only in Scotland, which voluntarily transfers your assets to a trustee. The trustee will then manage and sell your assets to pay your creditors - however they cannot take essential household items. You and the trustee are both legally bound by the terms laid down in the trust deed.

What is a Protected Trust Deed?
The advantage of a protected trust deed is that it stops ALL of your creditors from chasing you for the money that you owe to them.

You must do the following to have a protected trust deed:

write to all creditors advising them that you wish to have a protected trust deed.
state your intention to have a protected trust deed by placing an advert in the Edinburgh Gazette.

Your creditors then have 5 weeks to object in writing to your trustee. If no objections are received the trust deed automatically becomes protected.

What criteria must I meet to be eligible for a trust deed?
There is no set amount of debt needed for proposing a trust deed.
You must have a qualified and registered insolvency practitioner who is willing to act as your trustee; you cannot ask the Accountant in Bankruptcy.

A trust deed can contain any terms you believe that your creditors will accept. However, if you want a protected trust deed you must transfer everything you own, except household items. For a protected trust deed there is a standard deed that is used.

What are the consequences of proposing a trust deed?
The positive consequence of a protected trust deed is that it stops ALL of your creditors (even those who object) from pursuing you for the money that you owe.

A trust deed also allows you to avoid some of the personal consequences of sequestration (bankruptcy).

The trust deed is legally binding on you and if you do not co-operate with your trustee, or comply with the terms as laid out in the trust deed, your trustee can petition for your sequestration (bankruptcy).

If you sign a trust deed, it allows any creditor to whom you owe at least £1,500 to petition for your sequestration in the 5-week period before it becomes protected. If those creditors write to your trustee and advise them that they object they have an extra week to send their sequestration petition to court.

Can the trustee sell my house?
If a property has been transferred to a trustee under the terms of a trust deed then they will be able to sell this.

If you have equity this will be taken into account and may need to be released to pay your creditors. However if you own your property with someone else, it will only be your portion of the equity that can be taken into consideration unless the co-owner agrees to release their portion of the equity and contribute this to the trust deed.

However, the property is only transferred automatically if you intend to propose a protected trust deed. In the event that you propose an unprotected trust deed it may be possible to withhold some of your assets. You must always consider however whether such a proposal will be acceptable to your creditors.
If your house is jointly owned, the trustee will require the consent of the co-owner before a sale can take place, or that of anyone who may have occupancy rights.

When will I be discharged from my debts?
At the end of the Trust Deed any debt remaining will, in effect, be written off. A Trust Deed lasts for a maximum of 3 years; after this time you will be free from debt.

What if my creditors object to a trust deed?
The rejection of your proposed trust deed would provide you with grounds for petitioning for your own sequestration as long as (a) you owe at least £1,500 and (b) have not be sequestrated in the past 12 months.

Who to contact for further assistance
If you would like to be put in contact with a Scottish insolvency practitioner who can assist you with the proposal of a trust deed, please contact ClearDebt by either emailing us at: enquiries@cleardebt.co.uk or calling our information line on: freephone 08000 192 095.

Alternatively you may wish to contact the Accountant in Bankruptcy (the Scottish insolvency service) for help. You can write to:

George House
126 George Street
Edinburgh
EH2 4HH

Phone: 0131 473 4600
Fax: 0131 473 4737
Helpline: 0845 762 6171
Email:helpline@aib.gov.uk

Please note, the Accountant in Bankruptcy can only advise on the procedures involved with setting up a protected trust deed and the consequences. They are unable to advise whether a protected trust deed is the best way to deal with your debt.

Your local telephone directory should give you additional addresses for free debt advisors, such as the Citizens Advice Bureaux, in your area.

Links to related ClearDebt articles:

Debt Help - Reduce Credit Card Debt
ClearDebt launches IVA Protect – Payment Protection Insurance
ClearDebt Payment Protection - The Genuinely Ethical Approach.
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