Life in a trust deed
A trust deed changes some parts of everyday life, usually for four years, and leaves others much as they were. Here is what to expect.
Life in a trust deed mostly means living on an agreed budget and making one monthly payment to your trustee, usually for four years. Your trustee is the licensed insolvency practitioner who runs the trust deed and deals with your creditors. You normally keep working, keep a bank account and keep paying your rent or mortgage as before.
What changes when a trust deed starts?
- One payment. Your monthly payment is worked out using the Common Financial Tool, the official method used in Scotland to set out your essential spending and what you can afford. It is reviewed at least once a year and can go up or down.
- Your creditors. Once the trust deed is protected, the Accountant in Bankruptcy (AiB, the public body that supervises trust deeds in Scotland) says creditors cannot collect the debts from you. They may still send paperwork such as annual statements.
- Wage deductions. Any earnings arrestment (a court-backed deduction from your wages) stops having effect once the trust deed is protected.
- Your assets. Things of value, such as your home or a car, pass to your trustee and may have to be sold or paid for in another way. Essential household items are not affected.
- Council tax. Your council may stop letting you pay council tax by monthly instalments once you grant a trust deed.
- Your credit rating. It is affected for six years from the date the trust deed begins. Your name is on the public Register of Insolvencies until 12 months after the trust deed ends.
What stays the same?
Your rent or mortgage, ongoing council tax, and gas, electricity and phone bills are not part of the trust deed. You keep paying them yourself, and they are allowed for in your budget. No contribution can be taken from Universal Credit or other benefits. Most people can keep working, although some employers, most commonly financial institutions, do not allow staff to have a trust deed.
Why must you tell your trustee about changes?
Your payment is based on your circumstances, so your trustee needs to know when they change. Tell them straight away if:
- your income or benefits go up or down
- you lose your job, become ill or might lose your job
- you receive a windfall, such as an inheritance or a lottery win (anything you gain in the first four years can be claimed for your creditors)
- you want to move, sell something valuable or take on new credit
If your income falls, your trustee may agree to reduce your payment or give you a payment break. If you stop paying without agreement, the trustee can arrange for payments to come from your wages, refuse to discharge you (so your debts are not written off), or petition for your sequestration, which is bankruptcy in Scotland. See what happens if a trust deed fails and our guide to changes in your circumstances.
If you are still deciding
A trust deed is one of several options in Scotland, alongside the Debt Arrangement Scheme (DAS), sequestration and the Minimal Asset Process (MAP). You can compare Scottish debt solutions, and free, impartial debt advice is available from independent services.
Official sources
- mygov.scot: how a trust deed could affect you
- mygov.scot: if your circumstances change during a trust deed
- Accountant in Bankruptcy: protected trust deed information document (PDF)
- Accountant in Bankruptcy: Common Financial Tool guidance on essential spending
- Bankruptcy (Scotland) Act 2016, section 173: earnings arrestments on protection
Guides in Life in a trust deed
- Your home and a trust deed Home equity, valuations, ways to keep your home, mortgage payments and renting in a trust deed.
- Getting a mortgage after a trust deed What mortgage lenders see after a trust deed, when the records clear, and how to prepare.
- Your car and a trust deed Keeping a car in a trust deed, what happens to hire purchase, and how other options compare.
- How a trust deed affects your credit rating How long a trust deed shows on your credit file, what lenders see and how to check your file.
- Will a trust deed affect my job? Employer rules, regulated jobs, company directors, wage deductions and redundancy in a trust deed.
- Bank accounts and a trust deed Keeping a bank account, overdrafts, set-off and basic bank accounts during a trust deed.
- Pensions and a trust deed Pension pots, pensions in payment, lump sums and pension contributions during a trust deed.
- Windfalls and inheritance in a trust deed Inheritance, lottery wins, compensation, bonuses and redundancy pay during a trust deed.
- Partners, family and joint debts No joint trust deeds, joint debts, your partner's income and what happens to your family.
- Trust deeds for the self-employed Sole traders, partnerships, business debts, HMRC and keeping your business during a trust deed.
- Trust deeds and benefits Universal Credit, benefit income, asset-based trust deeds and alternatives such as MAP.
- If your circumstances change Reviews, income changes, redundancy, illness, moving home and changing your trust deed payments.
Common questions
Can I carry on living normally during a trust deed?
For most day-to-day things, yes. You keep paying your rent or mortgage, council tax and bills, and in most cases you keep your job and a bank account. What changes is that you live on an agreed budget, make one monthly payment to your trustee, and need to tell your trustee about changes in your income, assets or circumstances while the trust deed runs.
Who do I deal with during a trust deed?
Your trustee, who is a licensed insolvency practitioner. The trustee collects your payments, deals with your creditors and reviews your finances at least once a year. If a creditor writes to you, pass the letter to your trustee. You may still receive paperwork such as annual statements, which creditors usually have to keep sending.
What happens if I cannot make a payment?
Contact your trustee before the payment is due. If your income has fallen, the trustee may agree to reduce your payment or give you a payment break. Stopping payments without agreement is risky: the trustee can arrange for payments to come from your wages, refuse to discharge you from your debts, or petition for your sequestration (bankruptcy).