Published in Debt Solutions Guide on Friday, November 19 2004

The Protected Trust Deed is offered only in Scotland as is similar to the IVA (Individual Voluntary Arrangement). It is a legally governed procedure by which you can repay your debt over a specified period of time, usually 3 years. Monthly payments are based on what you can realistically afford and after the period of your Protected Trust Deed, any remaining debt is written off.

The key benefits of a PTD are:

• Affordable payments. Your monthly income and outgoings will be assessed to calculate a monthly repayment that is affordable to you.
• No additional fees to pay. The fees for the setting up and supervising of the IVA will be taken from the monthly amounts paid into the arrangement, no fees will need to be paid directly.
• Debt free in 3 years. The PTD will normally last for 3 years, after which time any remaining debt (up to 90%) will be ‘written off’.
• Interest, charges and lender contact stopped. Your lenders will stop contacting you directly, and no more interest or charges will be added to your debts.
• Legally binding.

The PTD must be legally approved and supervised by a licensed Insolvency Practitioner.  The PTD binds both yourself and your lenders to adhere to it.

You will need to carefully consider the following before entering into a Protected Trust Deed:

• If you fail to keep to the agreed terms of the PTD you may be forced into Sequestration (the Scottish equivalent of Bankruptcy).
• If you have equity in your home you will need to offer to try to remortgage to release the equity towards the end of your Trust Deed.
• Your credit rating will be damaged for 6 years.

The Protected Trust Deed process

The first part in the process of entering into a Protected Trust Deed is to compile a full list of the lenders that you owe money to, how much you owe, and what you can afford to pay each month.  This is the ‘proposal’ and will be compiled on your behalf by your ‘Trustee’ (the licensed Insolvency Practitioner who will supervise your PTD).

The Trustee will put together a form of proposals to the lenders for approval and administer the Protected Trust Deed. The Trust Deed will be registered as a Protected Trust Deed. This prevents lenders from taking legal action against you and ensures that interest will be frozen on your debts. The Protected Trust Deed is granted if two thirds or more of your lenders by value agree to it.

You will make payments to your Trustee as agreed for 3 years, after which time any remaining debt will be written off.  You will also need to try to remortgage your property in the final year of the Trust Deed to release the equity.

Read our Protected Trust Deed Questions & Answers