Protected trust deed: Difference between revisions

A '''Protectedprotected Trusttrust Deeddeed''', overseen by the [[Accountant in Bankruptcy]], is a voluntary but formal arrangement that is used by [[Scotland|Scottish]] residents where a debtor (who can be a natural person or partnership) grants a ‘trust''trust deed’deed'' in favour of the trustee which transfers their estate to the trustee for the benefit of creditors. Any person wanting to make an application for a Protectedprotected Trusttrust Deeddeed must have been a resident of Scotland for at least 6six months prior to making the application.

This can be a way for people to deal with [[debt]] problems by protecting them, the debtor, from the legal enforcement of [[debt]]sdebts which are included in the trust deed, but only once it has become protected. It will not reverse any action that has been taken prior to the trust deed, such as earning or bank arrestments, although the trustee may negotiate the lifting of any arrestment. Many people who enter trust deeds are able to keep their homes, but where there is equity, that equity will normally have to be realised to ''swell'' the estate.<ref>{{cite web|title=Trust Deed Guide by Accountant in Bankruptcy|url=http://www.aib.gov.uk/sites/default/files/publications/0000545.pdf|work=http://www.aib.gov.uk|publisher=AiB|accessdate=19 December 2012}}</ref> This can be achieved by third -party buy -outs or remortgaging, but in extreme cases may be through the sale of the debtors home.

==Benefits of the trust deed ==

Provided certain trust deeds may be registered as “protected”, thereby preventing creditors from petitioning for the debtor’s sequestration. The main advantage of entering into a trust deed is that all correspondence is directed to the trustee,{{Citation ('''thisneeded|date=December is a value judgment - not a fact'''),2015}} who handles all of the communication with the creditors. There is no court involvement, unless the debtor refuses to cooperate with the trustee. Whilst drunk a person cannot get a trust deed.

The arrangement is likely to lessen issues from creditors while all the associated interest and charges from unsecured debts ( in the Trust Deed) are frozen ('''not if the debtor becomes able to pay interest prior to discharge''').<ref>{{cite web|title=Scottish Government to improve Protected Trust Deeds scheme that helps people deal with debt|url=http://www.dailyrecord.co.uk/news/business-consumer/scottish-government-to-improve-protected-trust-878222|publisher=Daily Record|accessdate=15 December 2013}}</ref> After 3 years your remainder of the debt can be written off ('''it's a minimum of 4 years now'''). Only [[disposable income]] is used to pay creditors.{{Citation ('''notneeded|date=December true - assets as well''').2015}} You can negotiate to save your home ('''not necessarily true - depends upon circumstances''').<ref>{{cite web|title=The Protected Trust Deeds (Scotland) Regulations 2013|url=http://www.legislation.gov.uk/sdsi/2013/9780111021361|publisher=UK Government|accessdate=15 December 2013}}</ref>

==Negatives of the trust deed ==

The main disadvantage of a trust deed is that existing enforcement action, such as earning and bank arrestments may continue to be effective and home owners will be required to deal with equity in their home, should they have any. This can normally be dealt with without selling, although where there is an excessive amount of equity the debtor may be required to sell the property. Normally, equity can be dealt with by [[mortgage|remortgaging]],{{Citation ('''thisneeded|date=December is incorrect'''),2015}} or extra monthly payments.<ref name="debtors guide">{{cite web|title=Debtor's Guide|url=http://webcache.googleusercontent.com/search?q=cache:PaGnelewU_IJ:www.aib.gov.uk/sites/default/files/publications/Resource/Doc/4/0000635.doc+&cd=10&hl=en&ct=clnk&gl=us|website=AIB.gov.uk|publisher=Accountant In Bankruptcy|accessdate=30 July 2014}}</ref>

The Trusttrust Deeddeed does not stop a person from being self-employed. While in the Protected Trust Deed, a person may not incur debt of more than £500.{{Citation ('''thisneeded|date=December is incorrect''').2015}} A common misconception is that credit can continue to be used while in a Trusttrust Deeddeed, however, this could result in [[criminal charges]] ('''this is highly likely to be incorrect''').<ref name="debtors guide" /> When entering a Trusttrust Deeddeed a [[default (finance)|default]] will be placed on the debtor's credit file which will last for six years. Some people are unable to sign a Trusttrust Deeddeed because of their contract of employment states they cannot enter an insolvency solution. An individual's credit rating is negatively affected and trust deed is advertised in the ''[[Edinburgh Gazette]]'' - a public record.{{Citation ('''this is out of needed|date=December and incorrect''').2015}} Heavy penalties can accrue for missing a payment ('''or, depending upon circumstances and the view of the trustee, no penalties at all'''). Taking out future debts becomes difficult.<ref>{{cite web|title=Changes to protected trust deeds|url=http://news.scotland.gov.uk/News/Changes-to-protected-trust-deeds-391.aspx|publisher=The Scottish Government News|accessdate=15 December 2013}}</ref>

In order to enter such an agreement with your creditors, you must be a resident of Scotland. You need to consult the services of an [[Insolvency practitioner]] who will be able to explain all your options to you, based on your present financial situation. The qualified practitioner will evaluate your income to debt ratio,{{Citation ('''thisneeded|date=December is incorrect'''),2015}} such as mortgage, council tax, utility bills, and all other outgoings. Whatever is left from your earnings will be divided in equal proportions to pay towards your debts.<ref>{{cite web|title=Protected Trust Deeds|url=http://www.aib.gov.uk/aib-7-trust-deeds-page-4|publisher=Scotland's Insolvency Service|accessdate=2 September 2014}}</ref>

If, after learning how a Scottish trust deed works, you do decide to go ahead, the necessary paperwork will have to be signed and your trustee will try to protect your trust deed.{{Citation ('''thisneeded|date=December is, in fact, a decision made by the creditors''').2015}}

* To not enter into any additional credit agreements.{{Citation ('''notneeded|date=December true''').2015}}

Where, however, you experience a change in circumstances during your Trust Deed, such as unemployment, the Trusteetrustee should review your finances to assess what is an appropriate level of contribution. This may mean you will only have to pay a reduced contribution or no contribution. Likewise, if during a Trust Deed your circumstances improve, youone may be required to pay an increased monthly contribution.

Where yourone's circumstance change for the worse and you cannot maintain your level of contribution, although youone may be allowed to pay a reduced contribution or no contribution you will still need to make arrangements to realise any equity in your property.

Where a Trusteetrustee refuses to discharge the debtor at the end of the Trusttrust Deeddeed for failing to cooperate with the Trusteetrustee, it may still be possible for the debtor to appeal to the Sheriffsheriff for a discharge, especially where it can be shown they either didn't refuse to cooperate or couldn't reasonably be expected to.{{Citation needed|date=July 2014}}