Protected Trust Deed FAQs
Here you’ll find the answers to the most frequently asked Protected Trust Deed questions. If you can’t find the answer to your query here, please don’t hesitate to call us.
How do I contact Baines & Ernst about a Protected Trust Deed or Sequestration?
To contact us, simply call us on the number at the top of the screen or complete the enquiry form and a member of our team will get back to you.
Will my lenders agree to a Protected Trust Deed?
Usually lenders want to recover as much of the debt as possible, and with a Protected Trust Deed, lenders understand that they will recoup much more of the debt than if you were to apply for Sequestration. PTDs offer lenders legal protection and the reassurance that they will receive a proportion of the debt owed to them; therefore they are likely to look upon PTDs more favourably.
Protected Trust Deeds are subject to lender agreement, which is not always guaranteed – so it is entirely up to the lender as to whether they want to enter into a PTD.
What is a Protected Trust Deed?
A Protected Trust Deed is a legally binding agreement between you and your lenders in which you agree to make a regular contribution from your income and to release certain assets to your Insolvency Practitioner.
Under legislation, if your lenders agree to the Trust Deed, it will become protected and therefore binding on all your unsecured debts. Interest and charges will be frozen, repayments will be based on what you can realistically afford and unpaid debts included in the arrangement that still exist at the end of the term (normally three years) will be written off.
How long does it take to set up a Protected Trust Deed?
If you decided to proceed with a Protected Trust Deed, the agreement can be set up either by a telephone call or a face-to-face consultation with an Insolvency Practitioner, who will explain in detail what is involved.
After you have signed the Protected Trust Deed, it is necessary for the Insolvency Practitioner to advertise the PTD in the Edinburgh Gazette and write to all of your lenders. Your lenders have 5 weeks from the publication in the Gazette to object to the proposal set out by your Insolvency Practitioner. As a PTD is subject to lender approval, you will need to secure agreement from one third of your lenders (by value) or one half in number for the Trust Deed to become protected and go ahead. This means that your lenders can no longer pursue you for recovery of any debt incurred prior to the Trust Deed being signed or add further interest and charges.
What are the advantages of a Protected Trust Deed?
A Protected Trust Deed is a solution that could help you clear unsecured debts.
- Affordable monthly payment
- Protection from lenders taking court action
- Interest and charges frozen
- Unsecured debts included in the PTD written off at the end of the term
- Become debt free usually at the end of 36 months
What are the disadvantages of a Protected Trust Deed?
Existing arrestments continue to be effective; however councils who carry out earnings arrestments are generally willing to consider lifting these upon the Trust Deed gaining protection.
The Deed is legally binding, therefore if you were to default on the arrangement, the Insolvency Practitioner petition for your Sequestration.
You could be required to sell assets or release equity from your home to repay lenders – this is dependent on your personal situation.
Your credit rating will be affected in the medium to long term and you will find it difficult to obtain credit in the future.
What effect will a Protected Trust Deed have on my home?
You will still be expected to continue to make your normal mortgage repayments. A secured lender (e.g. the Bank or Building Society which holds the mortgage) is not bound by the Protected Trust Deed and retains its normal rights.
Your Insolvency Practitioner may request that you release equity from your property to repay lenders. However, this depends on your situation. A valuation of the property will be carried out and the level of any outstanding mortgage or secured loans established.
Equity is the difference between the value of the property and the outstanding debts secured on the property. Equity will therefore be calculated and arrangements will need to be made for this sum to be paid to your Insolvency Practitioner. This can be done by re-mortgaging, a payment being made from a third party (often a family member or friend) or additional payments being made at the end of the Protected Trust Deed term.
What effect will a Trust Deed have on my car?
If the car is needed for work purposes, in most cases you will be allowed to keep it for the duration of the Deed. You may be asked to trade the car in for a less expensive model if the Insolvency Practitioner deems the vehicle to be too expensive. Hire purchase car loans will not be included in the PTD and you will be expected to make the monthly repayments in full on this type of secured loan.
What effect will a Protected Trust Deed have on my household possessions?
Whilst the sale of household possessions is possible, in practice it is unlikely unless they have a particularly high value.
What happens at the end of the Protected Trust Deed?
Upon successful completion, any debts included in the PTD that still exist will be written off and you will be free from your unsecured debts.
Who needs to know about the Protected Trust Deed?
After you have signed the Protected Trust Deed, it is necessary for the Insolvency Practitioner to advertise the PTD in the Edinburgh Gazette and write to all of your lenders. Once a Protected Trust Deed is approved, it is listed on the Register of Insolvencies. We recommend that you notify your family or partner before the PTD becomes public.
How long does a Protected Trust Deed last?
Most last for 3 years; however this depends on your financial and personal circumstances. For information on your specific circumstances, speak to one of our professional advisors.
