What is a Protected Trust Deed?
A Protected Trust Deed is a legally binding debt relief solution available to people living in Scotland with £5,000 or more of unsecured debt.
A Protected Trust Deed is a legally binding debt relief agreement for people struggling with £5,000 or more of unsecured debt. Only open to people living in Scotland a Protected Trust Deed is an agreement between an individual and a licensed Insolvency Practitioner (IP), who takes on the role of Trustee, will manage the agreement with creditors.
Interests relating to your debts are frozen and you will pay back what you owe, in accordance with your affordability, typically over four years with any remaining debts written off at the end of the agreement.
Advantages and Disadvantages
There are many factors to consider before opting for a Protected Trust Deed. Some advantages / disadvantages include:
Advantages
- Once approved, a Trust Deed is binding on all of the creditors included in it, whether they agreed to it or not
- Under a Trust Deed, creditors cannot apply any interest/charges to the debts included, take legal action, or contact you about your debts
- The TD provides a formal alternative to bankruptcy, meaning you don’t need to sell significant assets like your home
- You will make one affordable payment into the TD each month
- The TD lasts for a set period – usually five years – after which any debt left outstanding in the Trust Deed is written off
Disadvantages
- The creditors will vote on whether to accept your Trust Deed proposals, and a majority of the lenders (by debt level) will have to agree for it to be approved
- A Trust Deed will have a negative impact on your credit rating for at least six years, and the TD will be listed on a public insolvency register for the duration
- If there is reasonable equity in your property, you may be required to release this into your TD
- You will need to stick to an agreed budget for the duration of the TD, with restrictions on your expenditure
- If you do not keep to the terms of the TD, it could fail and your creditors could seek to reapply interest or petition for your bankruptcy
Gravity Plus LTD is a limited company registered in England and Wales. Regulated by the FCA – Financial Conduct Authority Reference Number 813465. Registered Office: Anchorage House, Unit 1, 252 The Quays, Salford, England, M50 3SD
Money Helper is an impartial service set up by the Government. They provide free debt counselling, debt adjustment and credit information services.