Which debts can go into a trust deed?

A trust deed can include most unsecured debts you owe on the date you sign, such as credit cards, loans, overdrafts, and arrears of council tax, rent or utility bills. Some debts, including student loans and court fines, can be included but are not written off at the end. Ongoing bills and any debts you take on after signing cannot be included at all.

An unsecured debt is one that is not tied to property you own. A secured debt, like a mortgage, is linked to your home, and the lender keeps its rights over that property whatever happens in your trust deed.

Which debts can you include?

mygov.scot lists these as unsecured debts you can include:

• bank overdrafts
• buy now, pay later credit
• credit cards and store cards
• payday loans and personal loans
• unsecured car finance
• arrears of utility bills, rent or council tax, as long as the missed payments happened before you signed

Your total debts, including interest, must come to at least £5,000 on the day you sign for the trust deed to become protected. Our guide to who can get a trust deed covers the other conditions.

You must tell your trustee about every creditor. AiB guidance says you must disclose all of them, and a notice on the public Register of Insolvencies brings the trust deed to the attention of any others. That includes creditors you would rather not involve, such as a friend or relative you owe money to.

Which debts are not written off?

If you are discharged at the end of a protected trust deed, the remaining debts you owed when you signed are written off. The law makes some exceptions, and some debts cannot go in at all.

For the debts that are included but not written off, mygov.scot says the creditor gets a payment from the trust deed, but you continue paying the rest once it ends.

What about council tax, rent and utility bills?

The rule is simple: past arrears can go in, ongoing bills cannot. Missed payments from before you signed can be included. Your council tax, rent, mortgage, gas, electricity, phone and insurance bills from then on have to be paid as normal, alongside your trust deed payment. Your trust deed payment is worked out after allowing for these essential costs.

In Scotland, council tax arrears can be recovered using a summary warrant. This adds a 10% surcharge to the debt and, after a 14-day charge for payment, lets sheriff officers (officers of the court who carry out enforcement) take action to recover it. Our guide to council tax arrears in Scotland explains how this works.

Once a trust deed is protected, any earnings arrestment stops having effect. An earnings arrestment is a type of diligence (the legal steps a creditor can take to recover a debt) where money is taken straight from your wages. Creditors also cannot start a new earnings arrestment for a debt that is included in the trust deed.

What happens to your mortgage and other secured debts?

A trust deed does not affect the rights of a secured creditor. Your mortgage lender can still rely on its security over your home, so you need to keep up your mortgage payments. mygov.scot says mortgage arrears can be included in a trust deed but will not be written off.

If you own your home, the equity in it (its value minus what is secured on it) is normally part of the trust deed, and you may need to release it by a lump sum or extra payments. In some cases the home can be excluded from the trust deed, but only if the lender agrees not to claim under it, and creditors may not agree to protect a trust deed that leaves equity out. See your home and a trust deed.

What about joint debts and debts you take on later?

Joint debts. If you share a debt with someone and sign a trust deed, mygov.scot says the other person becomes responsible for making payments towards it. A couple cannot sign one joint trust deed: each person needs their own. See partners, family and joint debts.

New debts. Anything you borrow after you sign cannot be included, is not written off at the end, and mygov.scot says you will not be protected from legal action by those new creditors.

What about benefit overpayments?

The Department for Work and Pensions’ guidance for councils says that a Housing Benefit overpayment decided before the trust deed was granted can only be recovered during the trust deed by deductions from ongoing benefit, and any amount still owed must be written off on discharge. Overpayments caused by fraud are the exception and can still be recovered afterwards.

For other overpayments, such as Universal Credit, tax credit or social fund overpayments, ask the adviser to explain how your own overpayment would be handled in a trust deed.

How do other solutions treat these debts?

Every Scottish debt solution has its own list of what can and cannot be dealt with.

• Debt Arrangement Scheme (DAS): you repay your debts in full over time, and interest, fees and charges are frozen and written off when the programme is completed. You cannot include student loans, court fines, ongoing payments, or hire purchase and conditional sale agreements (although arrears on those can go in). See trust deed or DAS.
• Sequestration (bankruptcy in Scotland): on discharge you are released from the debts you owed at the date of sequestration, with similar exceptions, including fines, compensation orders, debts from fraud and aliment.
• Informal debt management plans are not legally binding, so creditors are not obliged to write anything off.

Which debts you have is one of the things an adviser will look at when comparing your options. Free, impartial advice is available from the services in free debt advice in Scotland.

Official sources

• mygov.scot: debts that can be included in a trust deed
• Bankruptcy (Scotland) Act 2016, section 184: discharge and the debts it does not cover
• Bankruptcy (Scotland) Act 2016, section 185: student loans
• AiB Notes for Guidance 9.7: effect of discharge
• DWP Housing Benefit overpayments guide, Part 7: courts and civil proceedings