Protected Trust Deeds
(Scotland only)

Protected Trust Deeds - Scottish residents only

A Trust Deed is a legal process that is used in Scotland where a consumer who is in debt grants a ‘deed’ in favour of the trustee (e.g the insolvency practitioner) who transfers their assets to the trustee for the benefit of the organisations the consumer owes money to. Provided certain conditions are met, the Trust Deed may be registered as “protected”, thereby preventing creditors from petitioning for the debtor’s sequestration (called bankruptcy in the rest of the UK).

In England, Northern Ireland and Wales there is a similar alternative to a Trust Deed called an Individual Voluntary Arrangement (IVA). There is much more information on this site about IVAs (FAQs & an enquiry form).

The main advantage of entering into a Trust Deed is that it takes the pressure off the consumer/debtor. All correspondence with the creditors is conducted by the Trustee on behalf of the consumer. The main disadvantage of a Trust Deed is that existing arrestments and other diligence continue to be effective, home owners may be forced to sell if creditors cannot be paid in full from other sources and debtors cannot trade on their own account or hold directorships of a Limited company. Granting a Trust Deed, by which a person voluntarily transfers some or all of his or her assets to a trustee to administer on behalf of the creditors, is both less formal than the main alternative of sequestration and may also avoid some of the legal disabilities which follow from being made legally bankrupt.

Provided it meets certain conditions, a trust deed may be recorded in the Registrar of Insolvencies as a ‘Protected Trust Deed’. This prevents a creditor from petitioning for the debtor’s sequestration so long as the person granting the trust deed abides by its terms. Whilst signing a Trust Deed is less formal than sequestration, it is nevertheless a serious step to take. Granting a Trust Deed is a voluntary act but once a person has signed a Trust Deed he and the trustee are legally bound by it.