What happens if you miss a trust deed payment?

If you miss a trust deed payment, contact your trustee straight away. A missed payment does not end a trust deed on its own, but missed contributions can make it last longer, and the Accountant in Bankruptcy’s guidance says that after two missed payments in a row your trustee can have your contribution paid straight from your wages. If payments stop without agreement, the trust deed can fail, and your trustee can petition for your sequestration (Scotland’s form of bankruptcy).

Your trustee is the licensed insolvency practitioner who runs your trust deed. The Accountant in Bankruptcy (AiB) is the Scottish agency that supervises trust deeds. Free, impartial advice is available from the services in free debt advice in Scotland.

What should you do if you miss a payment?

AiB’s guidance says your trustee should have told you before you signed that if you cannot pay a contribution, you must contact them straight away. Do it before the payment date if you can see a problem coming.

1. Tell your trustee what has happened and why. For example, reduced hours, illness, a new baby, a separation or an emergency repair.
2. Expect to fill in a new budget. mygov.scot says your trustee will ask you to complete another income and expenditure form and show evidence of the change, such as payslips or benefit letters.
3. Ask what your options are. mygov.scot says that if your income goes down, your trustee may agree to reduce your payment or give you a payment break. See payment breaks in a trust deed.
4. Get any agreement in writing, including the new amount, how long it lasts and whether the trust deed will be extended.

mygov.scot says ongoing bills, such as rent or mortgage, council tax and energy, cannot go into a trust deed and still need to be paid separately. Your payment is worked out from what is left after those costs, using the Common Financial Tool, the set method used across Scotland. See how your trust deed payment is worked out.

What can your trustee do after missed payments?

A longer trust deed

The Bankruptcy (Scotland) Act 2016 lets your trustee set a payment period longer than 48 months where there has been a period when you did not pay your contributions. You and your trustee can also agree a longer period.

The trust deed still covers money or property you receive in the 4 years from the date you signed, such as an inheritance. That window is fixed, even if your payments run for longer. Your credit rating is affected for 6 years from the date the trust deed began, and if the trust deed runs on, check your credit report to see how it is shown.

Payments taken from your wages

AiB’s guidance sets out how this works:

• after two consecutive missed payments, your trustee can ask you to instruct your employer to pay your contribution from your earnings direct to the trustee. You do this on a prescribed form called Form 4A
• if you refuse, the trustee can instruct your employer directly, using Form 4B
• if the amount later needs to change, only you can tell your employer, using Form 4C. Refusing to do so can be treated as not co-operating
• your employer may charge a fee for making the payments, taken from the rest of your pay after the contribution
• if your employer fails to pay without good cause, the employer becomes liable for the amount, not you

The trustee must tell your employer in writing when the arrangement ends.

Refusing your discharge

Discharge is the legal end of the trust deed, when the debts left in it are written off. It is not automatic. Since 1 July 2024, a trustee who thinks you have not met your obligations or co-operated cannot simply refuse to discharge you: they must apply to AiB for agreement and give their reasons. If AiB agrees, your debts are not written off.

Sequestration

AiB’s guidance says a trustee can petition the sheriff for your sequestration if you fail to comply with an obligation under the trust deed or a reasonable requirement or instruction from the trustee, or if the trustee says sequestration is in your creditors’ best interests.

What if the missed payments were not your fault?

AiB’s guidance says it would not be appropriate to refuse your discharge because of circumstances beyond your control, such as a change in circumstances that stops you paying your contribution. That is a real protection, but it works best when your trustee knows what is happening and has the evidence.

AiB’s guidance also says contributions can be varied up and down, and the payment period extended or shortened, if your circumstances change. See if your circumstances change.

If something outside your control, such as a serious illness, means you cannot carry on at all and there is no reasonable prospect of that changing, your trustee can seek your early discharge for extenuating circumstances. Your creditors are asked first. AiB says a period of unemployment on its own would not normally be enough.

What happens if the trust deed fails?

Creditors who start again may use diligence, the legal steps a creditor can take to recover a debt, such as an arrestment of your wages or bank account, carried out by sheriff officers. See what happens if a trust deed fails.

Are there other options if a trust deed no longer works?

While a protected trust deed is in place, some routes are closed: you cannot apply for the Debt Arrangement Scheme (DAS), for example. If your trust deed ends without a discharge, the options may include DAS, where you repay your debts with interest, fees and charges frozen; sequestration, which usually ends in discharge after 12 months; the Minimal Asset Process for people with low income and few assets; or an informal debt management plan, which is not legally binding. An adviser needs to look at your full situation, including what happened with the trust deed, before any option is chosen.

Official sources

• AiB Notes for Guidance 2.14: contributions paid by an employer
• AiB Notes for Guidance 2.13: contributions
• Bankruptcy (Scotland) Act 2016, section 168: the payment period
• mygov.scot: if your circumstances change during the trust deed
• AiB protected trust deed information document