Trust Deeds

What is a Scottish Trust Deed?

For residents of Scotland, a trust deed represents the alternative to a formal bankruptcy. This debt solution allows individuals facing mounting debts to claw back into financial health. Given the complexities of a trust deed, you are better off speaking to a debt expert before choosing this option to get relief from your debt woes.

Components of A Trust Deed

Under a trust deed all your unsecured debts are consolidated and you make a single payment into the trust thus avoiding multiple fractured payments to individual creditors. Thus, the outstanding liabilities against your credit cards, personal loans, store cards and bank overdrafts can be brought under the trust deed. A trust deed can be set up only by an insolvency practitioner. Under a trust deed, your creditors agree to accept a repayment lower than what they would have received under normal circumstances.

The Process

After you indentify the insolvency practitioner to work with, he draws up a proposed trust deed and holds a meeting with the creditors to obtain their approval. When more than one third of the creditors by value of total debt agree to the proposal, the trust deed becomes protected. Creditors get upto 5 weeks to communicate their consent/objection to the proposal. An approved trust deed is considered as protected and all parties to the deed are legally bound to comply with the terms of the trust deed and that includes creditors who objected to the proposal. If any of the covered debts remain outstanding at the expiry of the trust deed, such remainder is deemed to have been settled and written off. When one third of your creditors do not agree to the proposal the ‘protected’ status will not come into force and it is open to the creditors to pursue further action against you.

How to Qualify

To qualify for a trust deed, you must be a Scottish resident living with parents, tenant, or homeowner. Your debt should be £4,000 or more and at least 2 creditors must figure under the trust deed. You must have disposable income. No credit verification is involved and even when you have a decree (CCJ) pending against you can apply for a trust deed. Married persons can apply subject to the spouse being informed.

Your Challenges

Some employers may prohibit employees from applying for Trust Deeds, and this could be particularly true of financial companies.  If you are holding positions in public bodies, you may not be eligible to continue in that office after the Trust Deed. You must speak to a debt expert to ascertain your position in this regard. If the trust deed fails for any reason, you may not qualify under the Debt Arrangement Scheme – DAS. You should be punctual in making the monthly payments and cooperate with the trustee until completion of the DPP under the Trust Deed program. Ownership of your home will stand transferred to the trustee and may be used to pay for trustee charges and covered debts.


Secured loans, student loans, mortgage, penalties, fines, forfeiture orders, ailment obligation, penalties by courts, and benefit overpayments are excluded from the scope of a Trust deed.