Scottish Trust Deeds

A trust deed is a form of insolvency which provides an agreement between a debtor and a creditor to legally pay back unsecured debts in a specified time at a reduced rate. 

Trust Deed: What is it?

Scottish trust deeds offer a form of debt help for Scotland that is similar to an IVA (Individual Voluntary Agreement) that enables a debt repayment deal to be agreed between debtors and creditors that benefit both parties.

There are significant differences between the trust deed and the IVA, but they both have the same objective. 

A trust deed enables the debtor to avoid bankruptcy, and the creditors to receive a better repayment than would have been possible were the debtor to be declared bankrupt. 

How do Scottish trust deeds work?

 If you are living in Scotland and have taken on too much debt, and if you now cannot pay it all back then you may be looking at trust deeds. 

If you have unsecured debts (credit cards, store cards, overdrafts) for which you find it impossible to meet the repayments, then a trust deed might well be your best bet.

It will not help you with secured debts such as your mortgage or car loan, but if you cannot pay your mortgage because you are also trying to pay the credit card companies, then it might be an excellent way to consolidate unsecured debts and still be able to maintain your mortgage payments.

 The trust deed is set up by a trustee. They will work out together the whole agreement and will manage it. A trustee is an insolvency practitioner, and as such is regulated by law and also by their regulatory body.

A trust deed will set out the detail of the monthly payments that will be made to creditors. The payments will be made for three years, and after this time any debt that has not been paid off will have to be canceled by the creditor. It is not a method of getting out of a loan as it can only be set up if the person is unable to make the current monthly payments.

A person considering setting up a trust deed would have to give all their financial details to the trustee. They would have to provide details of the amount owed, and the amount that they think they can afford every month. They would also have to give details of all other relevant information such as other debts, rent or mortgage.

If someone owes money to more than one creditor, then it can all be set up in one single trust deed. Once the trustee has all the details, then they will contact all the creditors on behalf of the debtor. They will try to get them to agree to a new payment scheme.

 Once the trust deed has been agreed by all parties, then it is protected. This means that after the three year period is up the creditors have no choice but to write off any remaining debt. The debtor has a responsibility to make the monthly payments and to declare any unexpected windfalls which are over two hundred pounds. They must also not take on any more credit during this period.

It is quite likely to affect any property that is owned by the debtor, as the lenders will expect to have the right to claim any equity. If the debtor is in this position then this may not be a good idea for them. They should get specialist advice from somewhere like Debt help Scotland as to the alternatives to Scottish trust deeds. Any decision to take out one of these trust deeds should involve a lot of thought and discussion with a professional as they are very serious and can affect quite a lot of things in a persons life.


Can anyone apply for a trust deed?

There are a number of criteria that need to be met, before being considered for a trust deed

  • You must have unsecured debts, in excess of £6,000
  • 2 or more creditors (there are a number of debts which cannot be considered for an IVA).
  • You would be employed, self-employed or a retiree.
  • You need to be able to pay back a minimum of £70 pound a month after all other house expenses.

Your repayments capabilities will be based on subtracting our necessary expenditure, such as your mortgage, council tax, utility bills, car finance and any other secured loans m your income along with a sum that the trustee considers sufficient for your living expenses. What is left from your income after these deductions will be split between your creditors proportionate to how much each is owed?


What are the steps in starting a Trust Deed?

  1. The first step with Scottish trust deeds is that you would work with a debt specialist to determine whether you are eligible for a trust deed or whether you would be better suited with a different debt solution.
  2. If you qualify, you will need to prove evidence to your debt solution specialist through paperwork, such as bank statements, utility bills and proof of your debts.
  3. Once the specialist has received this information, they would pass your information over to the Insolvency Practitioner.
  4. Your Insolvency Practitioner will be appointed as your trustee and will initiate the negotiations with your creditors. Your creditors will be made an offer of that amount each month for three years, and they have five weeks to object to the offer. A failure to comment is regarded as an acceptance, and if more than half don’t object, and if the total objections do not amount to more than a third of the total money you owe, then your proposal is accepted.
  5. Once the majority of your creditors agree on the repayment plan, you will begin your trust deed and you will pay the IP the agreed monthly amount, who will then distribute your repayments to the creditors. 

 Note: It is important to understand that all those involved with the setup a trust deed would be paid a fee for their services. This fee would be taken from your debts that have been negotiated. 

 Your creditors will accept the agreement if they believe they will get less by forcing bankruptcy. So far, then, Scottish trust deeds seem to be of benefit to you. However, many people are worried about what happens to their assets.

What are the negatives of a trust deed? 

If you own a car that is not essential for your work, then you will likely have to sell it and add that to the trust fund.

The trust is initially financed by the balance left of your income as calculated by your trustee, and the trustee fees as agreed with your creditors are deducted from the fund. Your car (or boat, or motorbike) will be sold, and that added to the fund before the percentage payout to your creditors being calculated.

If you have valuable collections, such as art , then these will be sold as will anything else regarded as not being essential.

If you own a house and have equity in it, you will likely have to realise that investment. You could sell it, and any profit added to the fund after your mortgage and any other loans secured on your property have been cleared, although, unlike bankruptcy, will be unlikely to be forced to sell it.

A family member could contribute a sum equivalent to the equity, or your trustee could help you get a secured loan to the equity value.

The loan you receive will then be added to the trust, and your monthly repayment reduced because your loan repayment will be taken from your disposable income. However, it is not likely that Scottish trust deeds will involve you losing your home, although it is equally unlikely that you will be allowed to profit from selling it.

A trust deed is is a better form of debt help for Scottish residents than being declared bankrupt. In that case, you are liable to lose all your assets, including your home contents in many cases, and a bankruptcy does far greater damage to your credit rating than a trust deed.



A trust deed  can be advantageous as it lessens the stress of dealing with debt, as all correspondence comes through the trustee. It is less severe than bankruptcy . If the debtor holds a position of public office, then it may be possible for them to retain this. If someone is a director of a company, then they may be able to continue trading.


Flexible debt solutions works as an intermediary. If you are looking to apply for a trust deed through our site, we will assess your credentials and pass you onto a debt specialist suited to your needs – who will pay us a fee on introduction.