A Protected Trust Deed is an alternative to bankruptcy and is a formal agreement between you and your creditors to make an affordable payment each month usually for 48 months (4 years) and in return your creditors agreeing to write off a significant amount of your unsecured debts. Debt levels should exceed £5,000, as a minimum.

Clifford Watts work with our Scottish partner, PJG Recovery to deliver a full range of Scottish debt solutions. PJG Recovery is a well-established company that has been providing a full range of personal and corporate insolvency solutions since 2002. Melanie Giles is a shareholder of PJG Recovery.

The level of the Trust Deed contribution is agreed with you in conjunction with your Trust Deed Advisor. The amount you pay every month must be affordable and acceptable to your creditors, based upon industry standard methods of calculating your disposable income. These funds are then collected from you each month and paid out to your creditors throughout the term of your Protected Trust Deed.

After your initial debt advice review with Clifford Watts, and with your explicit permission, we will arrange a meeting for you to discuss your circumstances in full to enable us to establish the right debt solution based on your individual circumstances and personal preferences.

If you sign a trust deed, you enter an agreement with a Trustee who will administer the trust deed. You must co-operate with your trustee. You agree that control of your assets, including your family home, car, savings and other items passes to your trustee who may sell them to pay your creditors. As stated above, you will usually agree to pay a regular amount from your wages, pension or other income.

What Happens During a Protected Trust Deed?

Once your Trust Deed is protected:

• You make a single, affordable monthly payment based on your income and living expenses.
• Creditors are prevented from taking further legal action against you.
• Interest and charges are frozen on your debts.
• You repay as much as possible over the agreed term (typically four years).
• At the end of the term, any remaining debts are written off, provided you meet the agreed terms.

Debts Covered by a Protected Trust Deed

A Protected Trust Deed covers unsecured debts, such as:

• Credit cards
• Personal loans
• Store cards
• Overdrafts

Certain debts cannot be included, such as:

• Secured debts (e.g., mortgages)
• Court fines
• Child maintenance payments
• Student loans

Advantages of a Protected Trust Deed

• Debt Write Off: Any remaining unsecured debts are written off at the end of the repayment period.
• Protection from Creditors: Once protected, creditors cannot take further action or demand immediate repayment.
• Affordable Payments: Monthly payments are based on what you can realistically afford.
• Interest Frozen: Interest and charges on your debts are frozen, preventing your debt from increasing.

Disadvantages of a Protected Trust Deed

• Impact on Credit Rating: A Trust Deed will affect your credit rating for six years, making it harder to borrow during this period.
• Potential Asset Loss: You may need to release some of the value from assets like a house or car to repay your debts.
• Public Record: A PTD is recorded in the public Register of Insolvencies, which is searchable by anyone.
• Not Suitable for Small Debts: If your debts are below £5,000, other solutions may be more appropriate.

Important points to consider before commencing a Protected Trust Deed

• It is important that you read the Debt Advice and Information Pack produced by the Accountant in Bankruptcy (AIB) before you sign a trust deed.
• A PTD is entered on a public register administered by the Accountant in Bankruptcy (AIB) which can be found at http://roi.aib.gov.uk/roi/.
• A PTD may last 3 years but the effect on your credit rating will last 6 years and potentially longer if the term of your PTD is extended.
• If your PTD fails, you may be made bankrupt and you remain liable for the balance of your debt and any Insolvency Practitioner fees and costs already incurred. In Scotland, sequestration is the legal word for bankruptcy. This may also stop you from being able to deal with your debts through a debt payment programme (DPP) under the Debt Arrangement Scheme.
• An ordinary trust deed is not binding on your creditors unless they agree to its terms and it becomes protected. Your Trust Deed will become protected if a sufficient proportion of creditors agree to it. When you sign a Trust Deed, your Trustee will write to all your creditors asking them to agree to its terms. They must respond within 5 weeks. If more than half of your creditors in number or if creditors who, together, are owed more than 2 thirds of your total debt, write to your Trustee to say they do not agree to your trust deed being protected, your Trust Deed will NOT become protected.
• A 'Protected Trust Deed' has historically been published by the Trustee in the Edinburgh Gazette as part of the process of the trust deed becoming 'protected'. This binds your creditors and prevents them from making you bankrupt so long as you stick to the terms of the PTD. New AIB proposals remove the requirement to advertise a trust deed in the Edinburgh Gazette, instead publishing the notice on the Register of Insolvencies.
• Recent changes implemented through Part 2 of the Home Owner and Debtor Protection (Scotland) Act in November 2010 affects how your home is treated in a PTD. If you own your home, you may have the option of asking your secured creditors (mortgage lender) for their permission to exclude your home from the trust deed. If your secured creditors agree, the rest of your creditors will be informed of this when they are asked to agree to the protection of your Trust Deed. If your creditors do not object to your trust deed becoming protected, you will keep control of the equity in your home. The rest of your assets pass to your Trustee as normal.
• During the term of the Trust Deed, you will not be able to obtain credit over £250 without telling the creditor about the PTD. Homeowners are likely to be required to release some of the equity in their property, though if they have a mortgage or secured loan against the property then the family home should not be at risk of being sold.
• Some debts are not discharged at the end of your trust deed, these include; court fines, liability from fraud, aliment obligations, student loans and secured loans (e.g. mortgage, second charge loans).
• Your trustee will be paid before any money is available to repay your creditors. The fees will normally range between £2,500 and £5,000. The fee will be recovered from the contributions you make during the time of the PTD.