A trust deed, also known as a “Scottish trust deed” or “protected trust deed”, must be approved by sufficient creditors so the debtor can benefit fully from it. This method is known as the trust deed receiving “protection” and is not necessarily guaranteed. Many creditors are satisfied to accept reduced scheduled monthly payments if the debtor shows they are committing to pay back what they can reasonably afford towards their debt.

When you agree to a trust deed your trust deed provider will distribute the specifics of the proposed arrangement to all your creditors. They then have the chance to accept or turn down the details of the trust deed. If enough creditors are happy with the proposal all of your creditors (even those who rejected it) will be legally bound by the details.

A signed trust deed is printed in the Edinburgh Gazette newspaper. Five weeks after the date of the advertisement is the target date for creditors to make a decision. To become protected, less than 50% of your creditors have to object to it becoming so. Secondly, a creditor (or group of creditors) can halt protection if they control more than a third of the value of what you owe and object to protection.

Creditors will generally agree to a Scottish trust deed acquiring protection where it is clear that the individual in debt cannot afford to continue with their contractual payments, that there’s no better option to repay a portion or the complete amount owed, and where the terms of the Scottish trust deed (as well as the charge of the trust deed provider) are viewed to be satisfactory.

Common reasons for objecting to a trust deed gaining protection include unreasonable fees being charged by the insolvency practioner, or a belief that the person in debt can afford to repay a higher amount of the debts owed and would have to do so, for instance, if they were to go bankrupt.

Creditors tend to appoint one of two main “voting agents” that act in response to trust deed agreements on their behalf. Such voting agents work to ensure that trust deed providers comprehend the factors that they put in practice when accepting or rejecting a proposal. In this way trust deed providers should anticipate, ahead in time, any critical risk that the Scottish trust deed will fail to gain protection and can therefore advise their client of this, at a stage when they aren’t committed.

This means that most highly valued trust deed companies experience protection rates exceeding 90% of their client.

For further details about protected trust deeds please visit Trust-Deed.co.uk. Our trust deed forum matches up members of the public that have debt questions with experienced trust deed professionals who are ready to provide answers. Further insight is provided by other visitors to the forum who share their personal experiences of starting, managing and completing a trust deed.

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