What is a Protected Trust Deed?
A Protected Trust Deed is only available to Scottish residents and is a legally binding arrangement between you and your creditors. You agree to make an affordable payment each month which typically lasts 4 years (But this can vary). After the agreed time period, any remaining debts included in the agreement will be written off.
How does a Protected Trust Deed work?
There are two parts to a Protected Trust Deed – protected and not protected. While your application for a Protected Trust Deed is reviewed it remains ‘unprotected’ (or just a Trust Deed) – this means creditors can still pursue you for outstanding debts. Once the Trust Deed has been protected creditors included in the PTD can no longer chase you for payments.
If entering a Protected Trust Deed is the best advice for you, your adviser will process your case for the application to the Insolvency Practitioner. A Protected Trust Deed must be arranged by a licensed Insolvency Practitioner who will become your Trustee (an individual who takes responsibility for your financial affairs). The Insolvency Practitioner will prepare and present your case to your eligible creditors. If there are no significant objections (more than 33% by debt value or 50% in number) the Trust Deed will become protected.
Once a Trust Deed becomes protected any unsecured creditors included within it cannot take legal action against you to recover debts. You must maintain the monthly contributions agreed in the PTD.
Is a Protected Trust Deed right for me?
You have to be a Scottish resident and must owe at least £5000 worth of unsecured debts. You also need to have some spare income to be able to afford comfortable monthly payments for the duration of your agreement.
How will a Protected Trust Deed affect me?
The Protected Trust Deed will be registered on your credit file for 6 years.
Your Trustee will control any assets you have (Not including essential items) and they may be sold to raise funds for your creditors. If you are a homeowner you may be asked to release any equity by way of a re-mortgage.
Please visit MoneyHelper for more information and advice regarding Protected Trust Deeds.