A Protected Trust Deed is a legally binding, formal debt solution available to residents of Scotland. An alternative to insolvency for people with debts exceeding £5,000, it allows you to freeze interest and charges and commit to affordable monthly repayments, usually over a 4-year period.

What Is a Protected Trust Deed?

A Protected Trust Deed (PTD) or Scottish Trust Deed is a legally binding formal debt solution, available to residents of Scotland. Much like an Individual Voluntary Agreement (IVA), it’s an alternative to insolvency, for people with debts exceeding £5,000, allowing you to freeze interest and charges. PTDs generally last 4 years, and during that time you’ll repay a set amount every month, calculated based on how much you can afford. Once complete, any remaining debts are written off.

The process begins when you transfer your belongings and property to a trustee, who then manages these assets on behalf of your creditors. The trustee will work with you to assess your financial situation and determine what you can realistically afford to pay each month. They will then negotiate with your creditors to accept these reduced payments. 

Trust deeds can be voluntary, however, to receive legal protection against creditors you will have to make it a legally binding ‘Protected’ Trust Deed. For this to happen, you need approval from creditors who represent at least a third of your overall debt balance. 

It’s also important to note that a PTD will affect your credit rating for 6 years from the start date, and details of your PTD will be recorded in the public Register of Insolvencies for at least 5 years.

How Can a Protected Trust Deed Help You?

A Protected Trust Deed may be the right option for you if you: 

• are a Scottish resident
• rely on credit or overdrafts
• have at least £5,000 in debt
• are in debt to multiple creditors
• are regularly contacted by creditors about outstanding payments
• struggle with high interest rates and charges on your repayments.

Helping you to budget more effectively, a Protected Trust Deed consolidates your debt into a single, affordable monthly payment based on what you can realistically afford. It can also grant you legal protections from creditors, so they can’t chase for payments, and allow you to write off debts at the end of the repayment period.

Key Features of a Protected Trust Deed

Some of the key features of a Protected Trust Deed include: 

• Legally binding agreement

A PTD is a legally binding contract between you and your creditors. This means that creditors must adhere to the terms of the agreement, and they are prevented from contacting you directly or taking further legal action.

• Consolidated monthly repayments

A PTD consolidates all your unsecured debts into one single monthly payment, which is based on what you can afford. This can include credit cards, loans, payday loans, and other unsecured debt. The repayment is typically lower than the total amount you would have been paying before, helping to make the debt more manageable.

• Frozen interest and charges

Another key feature of a PTD is that, once it is in place, any interest or charges applied to your debt are typically frozen. This prevents the overall amount you owe from continuing to grow, allowing you to focus on making payments without being burdened by increasing debt.

• Potential to write off debt

After the agreed repayment term (typically 4 years), any outstanding unsecured debt that has been included in the PTD is usually written off. This means that, once you’ve completed your payments, you can move forward without the burden of any remaining unsecured debt included in the trust deed.

• Trustee involvement

A trustee is appointed to oversee the trust deed and ensure that all the terms of the agreement are followed. The trustee will liaise with creditors, handle your payments, and ensure that any remaining debt included in the trust deed is written off at the end of the term. Their role is to protect both your interests and those of the creditors.

• No Impact on secured debts

It’s important to note that a protected trust deed only covers unsecured debts, such as credit cards or personal loans. Secured debts, such as mortgages or car loans, are not included. If you have secured debts, you’ll still need to manage and pay for these separately.

• Impact on credit rating

While a PTD can help you eliminate unsecured debt, it will remain on your credit record for six years, which may impact your ability to obtain credit during this time. However, after the completion of your PTD and the discharge of your debts, your credit rating can start to improve, and you’ll have the opportunity to rebuild it.

Explore More About Protected Trust Deeds

To find out more about Protected Trust Deeds, you can visit the following pages:

How It Works

Applying for a Protected Trust Deed involves a number of steps, from reviewing your financial situation to submitting your proposal for approval by your creditors. This page goes through these steps in detail so you’ll know exactly what to do.

Pros and Cons

Before applying for a Protected Trust Deed, it’s important to look at the advantages and disadvantages. While it can help consolidate your debt into more affordable monthly payments, it does affect your credit rating. Take a look at the page below for a detailed list of pros and cons.

Calculator

If you’re considering a Protected Trust Deed, it can be helpful to estimate your monthly repayment amount and how much debt could be written off. Our Protected Trust Deed calculator can help you with that. 

Eligibility

In the page below, the eligibility criteria for a Protected Trust Deed is explained in detail, as well as factors that may impact your eligibility and other options if you’re not eligible for a Protected Trust Deed. 

Other Debt Solutions for Scottish Residents

If you’re based in Scotland and struggling with debt, there are a number of different options available. It’s worth researching and comparing them before deciding which is best for you.

Sequestration

Sequestration, the Scottish equivalent to bankruptcy, is a process that involves the selling of any assets you may have to pay off your debt. Any remaining debt is then written off after a year. It’s a quicker option than a Protected Trust Deed, lasting only 12 months instead of 4 years. However, sequestration has more restrictions and you may lose your assets.

Minimal Asset Process (MAP)

The Minimal Asset Process (MAP) is designed for those with low income and minimal assets.  Unlike a Protected Trust Deed, there are no monthly repayments. Instead, your debt is frozen for 6 months and after this period, your debts will likely be written off unless your circumstances have changed. MAP is only available to those with very limited means, whereas a PTD is more suitable for individuals who have some income to contribute to regular repayments.

Debt Arrangement Scheme (DAS)

A Debt Arrangement Scheme (DAS) is a structured repayment plan that freezes interest and charges while you pay off your debts in full, but it can last up to 10 years. Unlike a Protected Trust Deed, which may write off remaining debt after a set period, a DAS requires full repayment. A PTD is often better for those who can’t repay the full debt and want to reduce the amount owed, whereas a DAS is suitable for individuals committed to repaying everything over time.

Protected Trust Deed FAQs

Which debts are included in a Protected Trust Deed?

A Protected Trust Deed covers most unsecured debts, including:

• Credit cards
• Personal loans
• Council tax arrears
• Rent arrears
• Overdraft
• Store cards
• Car parking charges
• CSA arrears
• HMRC debts
• Overpaid tax credits
• Payday loans
• Buy now, pay later debts.

Which debts aren’t included in a Protected Trust Deed?

Though a Trust Deed includes nearly all unsecured debts, there are some exceptions. These include:

• Student loans
• Debts obtained fraudulently
• Fines
• Any secured loans.

Will a Protected Trust Deed impact my job? 

In most instances, entering into a Trust Deed will not affect your current or future employment, though we would always advise checking your contract or speaking to your HR department before signing any formal agreements.

How does being on a Protected Trust Deed affect my mortgage?

If you already own your home, you will be able to keep it whilst on a Protected Trust Deed. However, it’s likely you will be asked to release some of the equity in your home to repay your debts. This equity is worked out with you and fixed at the start of your Trust Deed.

If you’re looking to get a mortgage, it should be noted that you may find it difficult to get credit, or you may find it comes with higher interest.

How does being on a Protected Trust Deed affect renting?

Generally, a Trust Deed should not change your ability to rent your current property, unless it is stated anywhere in your current contract that you cannot be on some form of debt solution. We always encourage you to check contracts before committing.

With a negatively affected credit score, you may find it harder to rent a property in the future, as landlords may find your negative score as a deterrent in leasing to you. This may be negated by renting with another person or securing a guarantor, who can guarantee payments for you. It is usually best to be upfront with prospective landlords about your current situation.

Will a Protected Trust Deed stop bailiffs?

Once entered, a Scottish Protected Trust Deed protects you from legal action and creditors can no longer contact you for payments. This includes sending bailiffs to your property. So long as your creditors agree to the terms of your Trust Deed, and you keep up with the monthly repayments, your creditors won’t be able to contact you directly. Any communication with them will be handled by your trustee.

Will a Protected Trust Deed affect my assets?

While you may have to sell off some assets to offset costs towards your creditors, it’s likely you will be able to keep a car, provided it is valued at less than £3,000. If the vehicle is valued at a significant amount, you may be asked to sell it or trade it for a less expensive one.

If your car is on finance (and the repayments aren’t excessive) they will be included in your monthly repayments.

Any savings you have prior to your Trust Deed will likely be included in your agreement. When creating your monthly budget, a ‘contingency amount’ (up to £30 a month) will be allowed for savings, as well as an ‘irregularities amount’ for unforeseen household repairs.

Can you pay off a Trust Deed early?

If your circumstances change or you receive a large windfall whilst completing your Trust Deed, you may be able to settle early.

The offer will have to be made by your Insolvency Practitioner (IP) who will write up a proposal and put it to your creditors. This is known as Variation, and for it to be agreed, at least 75% of creditors that respond have to say yes to it.  

How We Can Help

If you think a Protected Trust Deed could be right for you and would like to know more, or if you want to explore other debt solutions, it’s worth contacting a debt expert. MoneyHelper offers free debt and Protected Trust Deed advice. 

Alternatively, the team at MoneyPlus is here to help. We know that no two financial situations are the same, which is why we approach all our customers with the individuality and care that they deserve. To find out more, simply get in touch with us.