How to get a trust deed in Scotland

To get a trust deed in Scotland, you need a licensed insolvency practitioner, who looks at your finances, explains all your options and, if you go ahead, becomes your trustee. Before you sign, they must give you a Debt Advice and Information Package and a trust deed information document, and at least 3 calendar days to think it over. You do not apply to the Accountant in Bankruptcy (AiB) yourself: the trustee deals with AiB after you sign.

This page covers the steps from first contact to signing. For what happens after that, see how a trust deed works. Free, impartial advice is available at any point from the services in free debt advice in Scotland.

How do you get a trust deed in Scotland?

In outline, the process looks like this:

1. Get advice about all your options, ideally from a free money adviser.
2. Ask about breathing space if creditors are pressing you.
3. Contact a licensed insolvency practitioner, the only person who can arrange a trust deed.
4. Your budget is worked out using the Common Financial Tool, the set method used across Scotland.
5. You get tailored advice in writing about every option, including the costs and risks.
6. You receive two documents and at least 3 calendar days to think.
7. You sign, along with a statement confirming the warnings and documents were given.

Where should you start?

mygov.scot’s step-by-step guide puts speaking to a money adviser before contacting an insolvency practitioner, because other debt solutions may suit you better. A free money adviser can compare a trust deed with the Debt Arrangement Scheme (DAS), sequestration (Scotland’s form of bankruptcy) and other options.

If you are under pressure from creditors, ask about a moratorium on diligence. Diligence means the legal steps a creditor can take to recover a debt, such as taking money from your wages. A moratorium stops most new action for 6 months, and you can apply yourself or through a money adviser. It does not freeze interest. If notice of your trust deed has been entered on the Register of Insolvencies before the 6 months are up, the law lets the moratorium run on while the trust deed waits for a decision on protection.

How do you choose an insolvency practitioner?

mygov.scot says insolvency practitioners are regulated by law and must be members of an approved professional body. A money adviser may be able to suggest one, or you can contact a firm yourself.

When you do:

• Check they are licensed. Ask for the full name of the insolvency practitioner who would be your trustee, and which body licenses them. The person you first speak to may be a member of their staff. Our guide to what to check before you sign explains how to look them up.
• Ask how you were referred. If a website or another company passed your details on, the insolvency practitioner must check whether that firm gave you advice and, if so, whether it was authorised by the Financial Conduct Authority (FCA). They must also tell your creditors who referred you and the amount of, and reason for, any payment. This site passes details to an insolvency practitioner firm, and how our service works explains how.
• Take your time. Be wary of anyone who rushes you, calls a trust deed a government scheme or says it is your only option.

What happens when you are assessed?

AiB’s guidance says you must be interviewed, in person or by phone, by the insolvency practitioner or a suitably experienced member of their staff before you sign. They must make sure you understand that a trust deed is an insolvency procedure, that it is run for the benefit of your creditors, that you must disclose everything about your assets and finances, and that as a homeowner you could lose your home. The professional rules also say a meeting should always be offered, and that they should consider whether a face-to-face meeting, in person or by video, is needed, depending on things like your understanding of the process and any vulnerability.

What to have ready

mygov.scot says you will need copies of:

• bank statements
• payslips
• benefit award letters
• household bills
• a full list of who you owe money to and how much

You will also be asked about what you own, especially a home or a car. The insolvency practitioner must take reasonable steps to confirm your debts are over £5,000.

Your payment

Your contribution is worked out with the Common Financial Tool, and a trust deed takes the whole of your surplus income: what is left after your allowed spending. No contribution can be taken from Universal Credit or other benefits. AiB’s guidance says the amount, how often you pay and the number of payments must be agreed with you before you sign, so ask to see how the figure was reached.

Your home

If you own property, the professional rules say your interest in it should be identified and valued as early as possible, and an approach to your share of the equity (its value after the mortgage) agreed before you sign. You must also be told that your home can be left out of the trust deed, and the risks of doing that.

What must the insolvency practitioner explain?

Statement of Insolvency Practice 3.3 (SIP 3.3), the professional standard for trust deeds in Scotland, says the explanation must be tailored to you rather than generic. It should set out clearly:

• the advantages and disadvantages of each option open to you
• the key stages, and the difference between the insolvency practitioner as adviser and as trustee
• whether you might need extra help the trustee will not provide, and its likely cost
• how long the trust deed is likely to last, and what could change that, including any agreement about your home
• the likely costs and how money from your assets will be applied to them
• what is expected of you, and what happens if you do not keep to it
• how likely the trust deed is to become protected, and what happens if it is not
• the risk of it not being completed

SIP 3.3 says this must be confirmed to you in writing no later than when you receive the trust deed to sign. The law also requires the insolvency practitioner to warn you that a trust deed may lead to your sequestration, being refused credit, having to leave your home or give up property, paying contributions, damage to your job or business prospects, and the fact becoming public.

What happens before you sign?

You must be given two documents:

• the Debt Advice and Information Package, an AiB booklet explaining how creditors can take action and where to get free money advice
• the trust deed information document, a short AiB summary covering payments, your assets, fees, your credit rating, the public register and what happens if the trust deed fails

You must then have at least 3 calendar days to consider everything. The count does not include the day you receive the last of the advice and documents, or the day you sign. AiB’s own example: if the material is sent on 20 January, the three days are 21 to 23 January, and the earliest you can sign is 24 January. AiB says signing before the time is up means the trust deed will not meet the requirements for protection. Three days is a minimum, and some people need longer.

When you sign, you and the insolvency practitioner both sign a statement confirming these steps were followed. Read the trust deed itself carefully first. Once signed, it cannot simply be cancelled.

What happens after you sign?

Your 48-month payment period starts on the day you sign. The trustee registers a notice on the Register of Insolvencies, a public record anyone can search for free, and writes to your creditors, who have 5 weeks to object. If not enough of them object, AiB can register the trust deed as protected.

A trust deed is one of several options. DAS lets you repay your debts in full with interest, fees and charges frozen. Sequestration usually ends in discharge after 12 months. The Minimal Asset Process is a form of bankruptcy for people with debts of no more than £25,000 and few assets. An adviser needs to look at your full situation before any option is chosen. See choosing between the Scottish debt solutions.

Official sources

• mygov.scot: how to get a trust deed
• Bankruptcy (Scotland) Act 2016, section 167: advice and information before signing
• AiB Notes for Guidance 2.2: initial contact
• AiB Notes for Guidance 2.7: adequate time
• Statement of Insolvency Practice 3.3 (Scotland): trust deeds