Protected Trust Deeds

Protected Trust Deed

The Protected Trust Deed (PTD) is a very valuable alternative to bankruptcy/sequestration for people living in Scotland. It is similar to the IVA in England and gives you many of the same benefits.

A Protected Trust Deed allows you to benefit from new monthly payments that are based on what you can afford – and these new affordable payments replace all of your current monthly repayments. Any debts you still have at the end of the PTD period are written off.

How a Trust Deed works

All Trust Deeds are set up and administered by an Insolvency Practitioner who acts as the Protected Trust Deed (PTD) trustee. He or she puts together an initial proposal to your creditors, handles all correspondence with them and manages the whole process including the distribution of your new monthly payments. By entering into a Protected Trust Deed you agree to cooperate with the trustee and to pay the agreed monthly contributions.

You will also need to avoid further credit and tell the trustee if your financial circumstances change. When your proposal has been accepted and registered as a Protected Trust Deed, you are protected from further legal action by creditors and interest is frozen. The exact amount you might pay each month will depend on your own debts and personal situation but you will find that payments should be significantly less than existing minimum payments on your credit cards and loans.

Advantages of PTD

• You no longer have to deal with correspondence from your creditors.
• Monthly payments are set to what you can afford.
• Interest is frozen and your creditors cannot impose more charges or take further legal action.
• You will usually be able to hold certain public offices/remain self-employed or be a company director (unlike sequestration).
• Your remaining debts are usually effectively written off after three years.
• Other people will not know about your situation unless you choose to tell them.

Disadvantages

• No more borrowing during the PTD period.
• Credit rating is poor for a further year after the PTD.
• Credit is likely to be more expensive for you in future.
• Default can result in sequestration proceedings.
• Three year period.
• If the PTD fails no credit will be given in relation to any payments for fees within the PTD, meaning that you can end up paying more.

A Deed of Trust is often suitable when

• your unsecured debts are at least £10,000
• you have a stable monthly income

It’s very important to be wary of unrealistic promises from firms offering Protected Trust Deed. It is true that a Scottish Protected Trust Deed can write off significant amounts of debt in some cases, and it will last only three years (rather than five years for the English IVA). However, some companies will tell you they can write off a very large percentage of your debts.

In fact, the people you owe money to are unlikely to agree to this. Most lenders have standard terms for what they will accept in a PTD proposal and you need to work with an advisor who is honest with you about what you can achieve. If the PTD fails, your creditors will be able to pursue you for the full outstanding balance and no credit will be given in relation to any payments for fees within the PTD. Failure could also result in bankruptcy / sequestration.

Call us on 0800 988 9345 to discuss further about Scottish Trust Deeds.

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