Published in Debt Advice Features on Sunday, March 16 2008

We’ve provided an exhaustive list of common questions that people ask us about the Protected Trust Deed.  You may well have questions that we haven’t covered, in which case please contact us and we’ll get straight back to you with an answer.

Q. What is the difference between a Protected Trust Deed and an IVA (Individual Voluntary Arrangement)?

A. A Protected Trust Deed is the Scottish equivalent (in principle) of an IVA (Individual Voluntary Arrangement).

Q. How do I know whether a Protected Trust Deed is the right option to my debt problem?

A. Open Doors Money is a ‘best advice’ debt solution organisation, this means that we provide the most appropriate, unbiased advice for your debt problem, and our advice is free and without obligation.

Some debt solution companies promote the solutions that make them the most money, or don’t consider the full range of solutions to debt. Our policy is to always provide the best advice and offer a complete range of solutions.

Q. Is a Protected Trust Deed the same as Sequestration (Bankruptcy)?

A. No, although governed by the court and a legal process for persons with unmanageable debt, a Protected Trust Deed is a less formal process than Sequestration (Bankruptcy).

Q. Why will my lenders agree to a Protected Trust Deed?

A. Although the letters and calls you may have experienced recently may suggest otherwise, your lenders want to help you with your situation and recover as much of their debt as possible. As long as you communicate honestly with them about your situation, they will understand and will in most cases accept less than what you owe if that is all you can afford and as long as they are satisfied that you will keep to any agreement.

Sequestration (Bankruptcy) is costly, time consuming, and a large amount of the money raised from a Sequestration (Bankruptcy) will be used to cover professional fees, therefore lenders would in most cases prefer not to resolve the situation in this way.

A Protected Trust Deed offers the simplicity of a repayment arrangement between yourself and your lenders with legal backing, without the high cost and low returns of a Sequestration (Bankruptcy).

Your lenders will welcome a Protected Trust Deed where appropriate, as an effective resolution to the situation that you find yourself in.

Q. How long will the Protected Trust Deed take?

A. The Protected Trust Deed will usually last for a maximum of 3 years. Some Protected Trust Deeds may last for less than 3 years depending on individual financial circumstances.

Q. Will I lose my house if I enter into a Protected Trust Deed?

A. No, but if you have equity, this will be taken into account and will need to be released to pay your lenders. If the property is joint-owned, then an appropriate portion of the equity will be taken into consideration.

Q. Will a Protected Trust Deed affect my employment or professional status?

A. No, a Trust Deed is an arrangement for responsible people who want to deal with their debt problem, and as such you will not prejudice your employment.  However, be aware that your credit rating will be affected and the fact that you are in a Trust Deed will be known to any future employer if you consent to them conducting a credit search on you.

Q. I own a business, will I have to close it?

A. If you are self-employed, there may be some restrictions on your ability to trade. Alternative arrangements may, however, be available to allow trading to continue to generate future income.

Q. Can anyone find out that I’m in a Protected Trust Deed?

A. A Protected Trust Deed will not be publicly known, but information about a proposed Trust Deed will need to be published in order for lenders to hear about the proposal.

Q. Which lenders can be included in a Protected Trust Deed?

A. You can include debt to banks, finance companies, credit or store cards, HM Customs & Excise (VAT), Inland Revenue, and loans made by your friends and family. Debt that cannot be included are mortgage debt, hire purchase, student loans, fines, debt incurred through fraud, maintenance and child support arrears.

Q. What will happen if I fail to keep up payments on the Protected Trust Deed?

A. It is very important that once in a Protected Trust Deed that monthly payments are made as proposed. If at any point your financial situation changes and the monthly payments are no longer affordable, then you must consult immediately with your Trustee.

If you don’t keep up payments then your Trustee can initiate Sequestration (Bankruptcy) proceedings against you.

Q. What will happen at the end of the Trust Deed?

A. Your remaining debt will in effect be written off and you will be free from debt.

Q. Do I need to notify my partner or family?

A. You can choose not to notify your family, and even your partner, but we would advise that you do inform those that are very close to you.

Q. Will all debt covered by the Protected Trust Deed?

A. Your Protected Trust Deed will cover your unsecured debt and arrears, such as unsecured loans, credit cards and rent arrears.

Q. How does secured and unsecured debt differ?

A. Secured debt is secured against assets you own, such as a house or a car. If you fail to keep up repayments on secured debt your assets may be at risk. Unsecured loans are not secured on any asset.

Q. Do lenders have to accept the terms of the Protected Trust Deed?

A. If two thirds or more of your lenders by value agree to the proposals, the Trust Deed will be protected. If they don’t, then the Trust Deed can still go ahead but you will not be protected from further interest or recovery action.

Q. Can a single lender refuse the Protected Trust Deed?

A. Yes, but this will only stop the Protected Trust Deed proceeding if they account for a third or more in value of your total debt. If they account for less than a third in value then they will be bound by the terms of the Protected Trust Deed regardless.

Q. Will I be protected from further recovery action, charges and interest?

A. If the Trust Deed becomes a Protected Trust Deed it will prevent any further action, including the addition of charges, and all interest will be frozen.

Q. What if my financial situation changes?

A. You will be required to inform your Trustee of any changes in your financial circumstances, good or bad. If your income is reduced, the Trustee can propose a variation on the terms of the Trust Deed to reflect your new circumstances.

Q. Can a Protected Trust Deed be cancelled?

A. No, just as your lenders must abide by the terms of the Protected Trust Deed and accept what has been agreed, you must also keep up repayments as agreed.

Q. How long will it take to set-up a Protected Trust Deed?

A. The process of preparing the Protected Trust Deed will begin immediately and is usually set-up and fully in effect within 6 weeks.

Q. What will happen if the Protected Trust Deed is not approved?

A. There are other alternatives to a Protected Trust Deed if it is not approved, we will be happy to advise the next course of action if the T
rust Deed fails.