Trust Deeds and 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. We can help with these too.
Scottish Trust Deed
Procedures in Scotland are different, but, broadly speaking a
Trust Deed performs the function of an IVA and sequestration takes
the place of bankruptcy.
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 Scottish debtors with an alternative to
sequestration (bankruptcy in England and Wales).
There are two types of trust deeds:
- Trust deed (known sometimes as unprotected trust deeds)
- Protected trust deed.
What is a Trust Deed?
Trust Deeds are a formal insolvency 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. Rather than this, Protected Trust Deeds may often be the
better option for someone with debt problems in Scotland.
What is a Protected Trust Deed?
The advantage of protected trust deeds is that they stop 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 (an English Insolvency Practitioner can act in
relation to Scottish trust deeds) who is willing to act as your
trustee; you cannot ask the Accountant in Bankruptcy.
Trust deeds 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.
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.
Trust deeds also allow 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 £3,000 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
Please contact ClearDebt by either emailing us at:
enquiries@cleardebt.co.uk or calling our information line on:
freephone (from a landline) 08000 192 095.
It's also worth noting that if you have significant debts to
English companies you could be eligible for an IVA so get in touch
now and see if we can help you with your debt problems.
