Scottish Trust Deed

February 2009

A Trust Protected Deed is a formal and legally binding debt solution available to residents of Scotland. It is an agreement between an individual who is unable to pay his/her creditors in full and an Insolvency Practitioner (the Trustee).

The individual entering into a Trust Deed will have their income and expenditure assessed at a face-to-face meeting. The amount left over after essential expenditure has been taken into account will be contributed to the Trust Deed for a fixed period (usually three years). Essential expenditure would include mortgage/rent, housekeeping, reasonable travel costs, clothing etc. The dual purpose of the Trust Deed is to both regulate the individual's finances in a reasonable way and to achieve the best possible outcome for the creditors concerned.

Protected Trust Deed Criteria

The following criteria are generally applicable to start a Protected Trust Deed:

• You must be insolvent
• You must live in Scotland
• You have unsecured debts of more than £8,000
• You have regular income and disposable income of £200 or more per month

Whilst a Trust Deed is generally for 3 years it is possible for us to extend or reduce the term in order to fit your circumstances.

In addition any assets held by the individual might also be used to contribute towards the debt. This might include investments, expensive vehicles and most often the equity held in the individual's home if they are a homeowner. Home equity would normally be released by way of a re-mortgage. Assets would not normally include household goods such as TV's.

Once the Trust Deed has been granted our Insolvency Practitioner (IP) will advertise the case in the Edinburgh Gazette (a publication generally read by solicitors, accountants and bank staff rather than the general public). Our IP will then write to the individual's creditors explaining the process and the offer of repayment. Provided that no more than one third of your creditors (by value of debt), or a majority in number of the creditors, object to the Trust Deed it will become Protected. This means that no creditor can take court action against you for the recovery of any debt that dates from before the Trust Deed was signed.

In return for the contribution of an affordable monthly amount and/or the proceeds from available assets you will benefit in several ways. During the period of the Trust Deed interest is frozen. Our IP will deal with the creditors involved. At the end of the Trust Deed period, provided that you have met your commitments, any remaining debts are legally written off.

The fees for the services provided by the IP are met from the funds contributed to the Trust Deed. They will be deducted from the fund of money that has built up prior to the creditors being paid the balance.

Advantages

• Your Trustee deals with your creditors on your behalf
• Unlike sequestration (bankruptcy) a Trust Deed is not advertised in the local newspapers
• You make just one payment per month from your disposable (surplus) income
• When you Trust Deed becomes protected your creditors cannot take further action against you, arrest your earnings or continue to charge interest
• It is possible for individuals to hold certain public offices, remain as directors and for companies to continue to trade
• Trust Deeds normally last three (3) years and at the end of that term the remaining debt is effectively written off
• Trust Deeds are usually more flexible and cost less to administer than sequestration

Disadvantages

• Existing arrestments or diligences will still be effective
• You cannot be a director of a limited company
• It will affect your credit rating
• If you fail to keep up repayments then bankruptcy proceedings will probably be commenced against you
• Any material equity in your property will need to be released for the benefit of your creditors

Alternatives

• Debt Management Plan
• Debt Management Scheme
• Bankruptcy

Conclusion

Having a Trust Deed gives you the opportunity to avoid bankruptcy whilst repaying your creditors to the best of your ability over a realistic timescale. They give certainty to a previously uncertain future, and assist with financial rehabilitation leading to an eventual repaired credit rating. You may still find it difficult to obtain credit or a mortgage after completion.

All debt solutions will be discussed at your meeting with your EuroDebt Debt Advisor or Insolvency Practitioner, and your personal preferences will be a priority, subject to eligibility.

To arrange a free and no obligation meeting with a EuroDebt Regional Advisor call 0800 2 98 97 98 or complete the Contact Us form and add "Trust Deed" in the comments field.

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