Trust deeds explained
A trust deed is one of several ways to deal with debt under Scots law. These guides explain how it works, what it costs and what can go wrong, so you can weigh it up against the alternatives.
A trust deed is a formal, legally binding agreement under Scots law. You pass your assets and a share of your income to a trustee, who must be a qualified insolvency practitioner, and the trustee pays your creditors (the people and companies you owe money to). If the trust deed becomes protected and you keep to its terms, the debts included in it that are left at the end are written off.
What is a trust deed?
Most people in a trust deed make a monthly payment for 48 months. The amount is worked out using the Common Financial Tool, the set method used in Scotland to decide what someone can afford after essential spending. The trustee’s fees and other costs come out of those payments before creditors are paid.
A trust deed becomes protected if not enough creditors object to it within a 5-week period. The Accountant in Bankruptcy (AiB), Scotland’s insolvency service, registers protected trust deeds and supervises the trustee. A trust deed is a legal process, not a government scheme. Read more in what a trust deed is.
Scotland is different. Individual voluntary arrangements (IVAs), used in England and Wales, do not extend to Scotland. Debts here are enforced by sheriff officers, not bailiffs, using legal steps called diligence.
Who can a trust deed suit?
To grant a protected trust deed you must owe at least £5,000, have a connection to Scotland in the year before you sign, and be unable to repay everything within the payment period. Beyond the legal rules, a trust deed can suit some people who have a regular income left over after essential spending but no realistic way to clear their debts in full.
Whether it suits you depends on your whole situation: your income, your home, your job and the debts you owe. An adviser needs to look at all of it. See who can get a trust deed.
When might it not suit you?
AiB’s own information document says other options might be better if:
- you could pay off your debts in full over a reasonable time (the Debt Arrangement Scheme may fit better)
- you have a lot of equity in your property (refinancing might work)
- you do not think you can keep up payments for 4 years or more (bankruptcy, called sequestration in Scotland, might be a better choice)
What are the key risks?
Know the risks before you sign. Your credit rating will be affected for 6 years from the date the trust deed begins. Your name and address go on the public Register of Insolvencies. Fees come out of what you pay. Homeowners may need to release equity. Not all debts can be included or written off. If the trust deed fails, creditors can pursue you again and the trustee can petition for your sequestration.
What are the other options in Scotland?
A trust deed is one of several options. Others include the Debt Arrangement Scheme (DAS), sequestration, the Minimal Asset Process (MAP), a moratorium on diligence and informal payment plans. You can compare them in Scottish debt solutions compared.
Free, impartial advice is available before you decide anything. Find out where in free debt advice in Scotland.
Official sources
Guides in Trust deeds
- What is a trust deed? The meaning of a trust deed and a protected trust deed, and who is involved.
- How a trust deed works The steps and timeline of a trust deed, from advice and signing to discharge.
- Who can get a trust deed? The legal conditions for a trust deed, and when it may not be the right fit.
- Trust deed pros and cons The advantages and disadvantages of a trust deed, set out side by side.
- What a trust deed costs How trustee and AiB fees are set, paid and checked, and what to ask about them.
- How your trust deed payment is worked out The Common Financial Tool, surplus income, benefits and payment reviews explained.
- How long does a trust deed last? The 48-month payment period, what can extend it, and how it compares with other options.
- Which debts can go into a trust deed? Debts you can include, debts that are not written off, and bills you keep paying.
- How a trust deed becomes protected The register notice, the five-week objection period, and what happens if protection is refused.
- The Register of Insolvencies What the public trust deed register shows, who can search it and when your entry is removed.
- Getting discharged from a trust deed How debtor and trustee discharge work, what is written off, refusals and early discharge.
- What happens if a trust deed fails? Why trust deeds fail, what to do if you cannot pay, and what happens if yours fails.
- Before you sign a trust deed The information and time you must be given, questions to ask, and how to check an insolvency practitioner.
Common questions
Is a trust deed the same as an IVA?
No. Individual voluntary arrangements are used in England and Wales but do not extend to Scotland. A trust deed is sometimes compared with an IVA, but it runs under different law, the Bankruptcy (Scotland) Act 2016, with its own rules on protection, payments, fees and discharge.
How long does a trust deed last?
The standard payment period for a protected trust deed is 48 months from the date you sign it. It can be shorter only if your payments would clear your debts in full, and it can last longer if payments are missed, by agreement, or where extra payments for home equity run on after the 48 months.
Where can I get free advice about a trust deed?
Free, impartial debt advice is available in Scotland from services such as Citizens Advice Scotland, local council money advice teams, MoneyHelper, StepChange and National Debtline. A free adviser can look at your whole situation and explain every option, including ones that do not involve a trust deed.