Protected Trust Deed is a debt solution which was introduced 1985 and has had a range of changes since then. A protected trust deed was introduced to help people pay as much of their debt as possible and stop them having to become sequestrated. This option is only available to people who reside in Scotland the English, Welsh and Irish equivalent is an IVA.
If someone meets the criteria and wishes to go ahead with a trust deed then an insolvency practitioner (I.P) will collate all the relevant documents. Once the I.P has all the documentation they will advertise the trust deed in the Edinburgh Gazette in order to let all creditors know about the proposal. If 1/3 in value or a majority in number of creditors do not refuse the offer then the trust deed becomes protected.
Before considering a protected trust deed it is important to understand the criteria, positives and negatives of this solution.
Criteria
Need to be able to make a monthly payment to your creditors of at least 125
Unsecured debt must be 10,000 or more
Need to be in full time employment
need to be able to repay a minimum of 10% of the money borrowed over the course of the protected trust deed to your creditors
Positives of a Protected Trust Deed
Only one monthly payment to the debt
Interest and charges will be frozen, Unless the Protected Trust Deed fails at any stage, or you receive a windfall, then it is a requirement that interest and charges are repaid.
Will not have to liaise with your creditors as the insolvency company will do this on your behalf
Once a Trust Deed is signed it become protected and therefore means you and the creditors will be legally bound by the agreement, which means if the agreement is complete you will be debt free.
A homeowner may be able to retain their property, the Insolvency Practitioner will only be interested in any available equity
Will have less of an effect on a persons credit rating than if they entered sequestration
Negatives of a Protected Trust Deed
If there is any available equity within a property this may have to be included in the Protected Trust Deed proposal
A Protected Trust Deed may adversely affect a persons credit rating
Employment contract may not allow someone to enter a Trust Deed - they would need to check this with their employer
If someone enters a Trust Deed and does not meet the terms of the agreement they are likely to face Sequestration