What is a Protected Trust Deed?
Information and help on this service has been contributed by our Trust Deed specialist sister company, Buchanan Roxburgh.
If you live in Scotland and have unsecured debts which you are struggling to pay a Protected Trust Deed could be the ideal solution. Although there are a number of solutions which exist, there is no other financial arrangement that permits you the protection from your creditors, including the freezing of interest together with the affordability of a Protected Trust Deed.
A Protected Trust Deed is a realistic way forward for Scottish residents who have genuine problems paying their debts but who want to avoid Sequestration - the Scottish equivalent of Bankruptcy.
A Protected Trust Deed offers protection from your (unsecured) creditors. It is a legal agreement between yourself and your creditors which allows you to pay back just what you can afford, usually for a period of 36 months after which time the remaining debt which is included in the Protected Trust Deed is written off and you can look forward to a debt free fresh start.
With a Protected Trust Deed subject to creditor agreement:
- You only pay what you can reasonably afford to pay
- All interest and charges on your debts are frozen
- A Protected Trust Deed puts you in control of your finances
- Creditor pressure is removed
- There is no need for you to attend Court
- Upon successful completion all remaining unsecured debts included in the Protected Trust Deed are written off
- Failure to adhere to a Protected Trust Deed may result in sequestration
Our dedicated team of expert debt advisors will help you with more Trust Deed information as well as advice on all of the options available subject to your individual financial circumstances. Please call us on 0800 294 6310 for more information.
What is a Trust Deed
A Trust Deed is a legally binding agreement between you and your creditors in which you agree to make a regular contribution from your income and to release certain assets to your trustee (Insolvency Practitioner). A Trust Deed can only be set up with the help of a licensed Insolvency Practitioner who is there to advise you and to put your Trust Deed proposal to your creditors. The Insolvency Practitioner must at all times take your interests and those of your creditors into account.
Before you sign a Trust Deed the insolvency practitioner will advise you on the various options available to you. Should you consider a Trust Deed is the way forward for you your insolvency practitioner will help you to establish a list of your creditors, prepare an income and expenditure statement and a set an affordable monthly contribution. They will then notify all your creditors that you have signed a Trust Deed and send them details of the proposals.
Your trustee will negotiate with your creditors on your behalf and pay them a proportion of the amount owed to them from your contributions. It is a real alternative to Sequestration and normally lasts for three years. Under current legislation, if your creditors do not object to the Trust Deed it will become protected and therefore binding on all your unsecured creditors. The creditors have 5 weeks in which to object. Should the trustee not receive a sufficient number of objections then the Trust Deed will become protected. Hence the term, Protected Trust Deed.
Protected Trust Deed
Once the Trust Deed becomes protected all your unsecured creditors are bound by it and can no longer pursue you for the money owed.
As long as you continue to pay your monthly contributions and co-operate with your trustee as regards your assets your unsecured creditors can not commence any legal proceedings. All correspondence including telephone calls in relation to your debts with your creditors should then stop.
Your Payments
The monthly contribution you will be expected to make to the Trust Deed will be based on your surplus income after allowing for the day to day living expenses of you and your family. You will also be expected to surrender certain other assets i.e. equity in you property, car or other assets where necessary (see further notes below).
Ending the Trust Deed
A Trust Deed will normally last for 3 years but may be extended by the trustee in certain circumstances.
The trustee, after deducting costs, remuneration and outlays, will distribute the realised funds to your unsecured creditors in full and final settlement of everything you owe. Upon successful completion of the Trust Deed the creditors will have no further claim against you and, as far as you and the creditors are concerned, the balance of any unpaid debts (included in the Trust Deed) are written off.
Creditors attitude to a Trust Deed
A Trust Deed will normally produce a better outcome for the creditors than would be available to them with an alternative, such as Sequestration (court driven insolvency proceedings). It is a way of paying back a proportion of the debt based on available assets and disposable income when you are insolvent; and is normally looked upon favorably by your creditors as you are seen to be volunteering to resolve your financial problems.
Furthermore, creditors have the security of knowing that the Trust Deed is being administered by a suitably qualified professional.
How Baines & Ernst can help
We provide a free initial consultation where we will discuss your personal and financial circumstances in order to assess the most appropriate financial solution for you. If, during the consultation it appears that a Trust Deed is a solution for you we will offer you our Protected Trust Deed (PTD) Service.
What does our PTD service involve?
• Following the consultation we will provide you with our PTD Service pack, which provides further information relating to a Protected Trust Deed.
• We will collect the relevant documentation and paperwork from you relating to your financial circumstances
• We will review your documentation and pass your case to a qualified and licensed Insolvency Practitioner
• We will liaise with the Insolvency Practitioner (as relevant) to help ensure that they have the relevant information to progress your case.
For more information on Protected Trust Deeds, view the FAQs or call us (free) on 0800 096 1331.
Whilst our initial advice on Protected Trust Deeds and Sequestration is free, fees apply for our PTD Service and the Protected Trust Deed. Details of the costs and Key Information relating to our PTD Service and PTD can be seen below and will also be notified to you in advance.
Once we have forwarded your case to the Insolvency Practitioner it will then be the Insolvency Ptractioner’s responsibility to liaise with you and your creditors. Should it appear that you have a viable case your Insolvency Practitioner will draft your PTD proposal and advise you of the fees for the PTD by way of a Letter of Engagement.
Fees & Key Information
For Baines & Ernst to provide the PTD Service there will be an Administration Payment. This is calculated from the financial information provided to us in the application process and is an amount equal to your monthly disposable income. It will be used to cover our costs in collecting and reviewing your documentation and for our professional services in liaising with your creditors and for passing your case to the Insolvency Practitioner. The Administration Payment is retained by us and will not be allocated towards your Protected Trust Deed or paid to your Creditors and can be paid in two separate installments. A copy of our PTD Service Terms of Business can be viewed here.
We will provide the PTD Service with reasonable care and skill, but we cannot guarantee the result of the PTD Service or guarantee that your PTD proposal, as drafted by the Insolvency Practitioner (as relevant) will be accepted by your creditors. For a Trust Deed to become Protected and interest and charges to be frozen one third or more of your creditors (by value) must not object to it.
Once your case is passed across to the Insolvency Practitioner you will be informed separately by a Letter of Engagement from the Insolvency Practitioner of the proposed fees for the Trust Deed, tailored to your personal circumstances before you have to commit to a Trust Deed. The trustee's fees and the costs of administering your Trust Deed will be estimated by the trustee and advised to all creditors when they are notified of the Trust Deed. They will be deducted from the agreed contribution and proposed asset realisations prior to any payment being made to creditors. Fees incurred for Trust Deeds are variable dependent upon the monthly contribution to the arrangement and the agreement that is reached with your creditors.
Although you may become debt free upon successful completion of the PTD, a record of your PTD will be held on your credit file for up to six years, which will affect your credit rating and your ability to obtain credit in the future. Once a PTD is approved it is listed publicly on the Register of Insolvencies. Homeowners may be required to re-mortgage in the 3rd year and release available equity to pay off some or all of the debt. Alternative solutions may be offered.
You must continue to make payments in full towards any rent or mortgage, hire purchase agreements, any loan secured against property, council tax and utilities such as gas, electricity and water. However, your Insolvency Practitioner will make suitable allowances for you to be able to afford your priority debts and your day-to-day living costs before they calculate how much you can afford to pay towards your other creditors. Only unsecured debts included within the PTD may be written off at the end of the period and those not included, such as secured debts, Government fines and child support payments will remain.
During the course of the Trust Deed you will be required to obtain the approval of your trustee should you wish to raise credit in excess of £250, you must also notify the party giving you credit that you have signed a Trust Deed. You may encounter difficulty in obtaining credit at the end of the trust deed but you will be in a much better position if you are able to demonstrate that you have co-operated with your trustee and have successfully completed your trust deed.
The period of the Trust Deed may be extended to allow any missed payments to be paid. However, should you fail to co-operate with the trustee as regards paying the agreed monthly contribution it is likely that the Trustee will petition for your Sequestration.
In line with the Consumer Protection (Distance Selling) Regulations 2000 you may cancel the PTD Service at any time. You will have a cooling off period of seven working days from the date the PTD Service commences, during which you may cancel in writing and receive a refund of the administration payment paid. Please note that Protected Trust Deeds are legally binding arrangements and do not have a cooling off period. If a PTD fails you will be liable for the balance of the debt and fees and this will lead to sequestration
We aim to provide a professional service at all times. However, if you are unhappy with the service that you have received, please follow our complaints procedure explaining why you feel we have not met your expectations.
Using the Protected Trust Deed procedure is one of the most effective ways to manage your debt and return to a clean financial bill of health. For more advice on ‘what is a PTD’ and how it could help your debt problems - or for general queries and PTD information - contact Baines & Ernst today on 0800 096 1331 or complete the debt test form on the right of the page.
Please contact us to discuss your situation in order that we can help ensure you have the right solution for your circumstances. You can also view a free publication from The Insolvency Service ‘In Debt? Dealing With Your Creditors’ (www.insolvency.gov.uk/pdfs/guidanceleafletspdf/indebt-web.pdf. ) which provides an overview of some of the debt solutions that may be available.