Scottish Trust Deed: What happens next?

What happens next in the Scottish Trust Deed application process?

If the individual decides that a Scottish Trust Deed is their best option to deal with their debts, then the paperwork will be signed and the Trustee will attempt to have the Trust Deed protected.

Protection is achieved in the following way:

• The Trustee places a Notice in the Register of Insolvencies (ROI).

• No later than 1 week from publication of the Notice, the Trustee will present a proposal to the creditors based on the individual’s assets and liabilities and the income and expenditure.

• After a period of 5 weeks from publication of the Notice, if the Trustee has not received written objections from a majority in number of the creditors or any creditor(s) owed more than one third in value of the total debt, then the Trust Deed will be registered as protected.

• The Trust Deed becomes protected from the date it is registered on the ROI by the Accountant in Bankruptcy (AiB).

By obtaining protected status, this means that the creditors cannot take any further action against the individual for the recovery of their debts – they are legally bound by the terms of the
Trust Deed.

Once protected, the Trustee’s main duty is to realise the assets and/or collect regular contributions from the individual’s income, for a minimum period of 4 years, in order to make the agreed dividend payment to the creditors. The agreed contribution is subject to review at least annually or any time when an individual experiences a change in circumstances.

It is essential that the individual co-operates fully with the Trustee for the duration of the Trust Deed by providing all requested information, keeping the Trustee up to date with any changes
to their income or expenditure, advise of any changes to their contact details and, as far as possible, maintaining the agreed payments.

At the end of the Trust Deed, the individual will be discharged from all debts included in the Trust Deed and can hopefully look forward to life after debt

Scottish Trust Deed Case Studies

Scottish Trust Deed Scenario 1

• Married couple with 2 children of school age, Mr & Mrs in full time employment, Mr earns £2,000/m, Mrs earns £1,200/m.
• Mr has debts of £40K, Mrs has debts of £25K, £20K of the debts are joint, total repayments are £1,300/m.
• Home is jointly owned with £5,000 of equity.
• Jointly owned Term Life Assurance policy.
• Motor vehicle on HP, Mr is the registered owner & uses the car for work purposes.

Debts were incurred for home improvements and then to supplement the household income when Mrs took time off work to look after their children before they started school, a large consolidation loan was obtained in an effort to reduce their monthly outgoings but they continued to utilise other credit and their level of debt spiralled out of control. They then sought financial advice.

Solution:

Both Mr and Mrs signed Trust Deeds; Mr pays £250/m, Mrs pays £150/m for a 4 year period; Mrs’s parents are paying 20 monthly payments of £250 to acquire the Trustee’s interest in the
property – £2,500 to each Trust Deed; the premium for life assurance policy is an allowable expense; Mr has also been allowed the HP payment as an expense and the HP company is
willing to allow the agreement to continue. At the end of the Scottish Trust Deed, creditors will have received a payment of approx. 20p in the £ from Mr and a payment of approx. 17p in the £ from Mrs, all remaining debts will be written off.

The joint debts will receive approx. 37p in the £ in total from both Scottish Trust Deeds.

Scottish Trust Deed Scenario 2

• Divorced male, self-employed tradesman, 1 dependant who lives with his ex-wife and for whom he has visitation rights, earns approx. £1,800/month.
• Debts of £35,000, including £10K shortfall due to mortgage lender from repossessed family home and self-assessment tax debt of £8K.
• Now lives in rented accommodation, family home was solely owned.
• Works van, owned outright, poor condition, high mileage.

Debts were incurred in previous marriage to maintain his family’s standard of living, ex-wife was unemployed, loans and credit cards were used to supplement his income, marital
breakdown followed and the family home was repossessed, he struggled to maintain his repayments but his income was insufficient to pay his daily living expenses, child
maintenance, household bills and his creditors. He then sought financial advice.

Solution:

He signed a Trust Deed, paying £190/m for a 4 year period; the van will be kept as it is required for work purposes; an allowance has been made for child maintenance payments, ongoing
self-assessment tax and NI contributions (he must pay his ongoing tax liabilities); the property shortfall will be treated in the same way as all other debts; at the end of the Trust Deed all
creditors will have received a payment of 10p in the £, all remaining debts will be written off.

Also see Debt Arrangement Scheme: What happens next.

Scottish Trust Deed Advice

You can get debt advice today by calling Trust Deed Scotland^® on 0141 221 0999 or start your debt help journey by completing our Trust Deed Wizard^® tool.

Our experienced advisors give friendly, confidential and non-judgemental debt advice that covers the advantages and disadvantages of Scottish Trust Deeds and all other formal debt solutions open to Scottish residents.