Scottish Trust Deeds


trustEverything You Need To Know About Scottish Trust Deeds

A trust deed is simply a legally binding agreement that allows debtors in Scotland to pay off their outstanding debts over an agreed period. In most cases, people use such an agreement to settle their unsecured debts over a period of four years. In return, creditors usually agree to write off remaining debts. Here is more information about this topic:


How a Trust Deed Scotland Works

In order to set up a trust deed, you require the help of a Insolvency Practitioner (IP) licensed by the office of fair trading. He/she will act as your trustee and help you draw up a debt repayment plan that your creditors can approve. To start with, your IP will look at your finances and the unsecured debts you are unable to pay and then draw a payment plan based on the information at hand. After this, he/she will call a meeting of all creditors and present the drawn up proposal.

Your creditors will look at the proposal and vote to determine whether it is acceptable or unacceptable. In general, a trust deed proposal will become valid if creditors who own more than 33 percent of your debt approve and adopt the proposal. Take note that all creditors have five weeks from the date of receiving notice of such a proposal to raise their objections. After the approval of the proposal, it becomes legally binding to all interested parties.

Typical Fees

An insolvency practitioner does not work or offer his services free of charge, so you will pay some money for the service. The good news is you do not have to pay the required fees and charges upfront. Most IP’s deduct their fees from the money that their clients deposit into trust deeds every month. Some of the charges that you may have to pay include fees for drafting and administering your agreement as well as fees for corresponding with creditors.

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Types of Trust Deeds

There are two types of trust deeds in Scotland: voluntary and protected. The former consists of an agreement between a debtor and creditors to clear only part of unpaid debts. The problem with this type of deed is it cannot become legally binding unless creditors agree to its terms and conditions.

On the other hand, the latter agreement is legally binding to all creditors regardless of whether they agree or disagree with its terms. In fact, any non disagreeing creditor cannot use other legal means such as sequestration to recover unpaid monies from a debtor.

Qualification Criteria

Although you can apply for an trust deed to help pay off creditors, you must satisfy certain criteria. To start with, you must live in Scotland. Secondly, you must have unsecured debts of at least £5,000. To be precise, one can only use such an arrangement to clear debts of £5,000 or more as well as joint debts of £10,000 or more. Thirdly, you must owe money to more than one creditor. Fourthly, you must be in a position to clear at least 10 percent of your outstanding debts.


Firstly, you will only make one monthly payment to all your creditors. Secondly, you do not have to worry about interest charges for the entire duration of the agreement. Thirdly, creditors cannot call you or harass you in any way to demand their money. They can only get in touch with your trustee after the establishment of your agreement.

Fourthly, you will be debt free at the end of the trust deed period. Moreover, you will only have repaid a proportion of money owed to creditors. Fifthly, you can remain in your home if you are a homeowner.


You may have to surrender any equity in your home. Setting up a trust deed will affect your credit rating negatively (for up to six years). Furthermore, you could face sequestration proceedings if you fail to keep your end of the bargain.

In summary, setting up a trust deed is a straightforward affair that takes about three months. Still, it would be best to seek advice from a licensed IP. A Scottish trust deed can help you become debt free within four years provided you make keep up with monthly payments. Nevertheless, it will sully your credit rating for six years.