Trust Deeds (in Scotland only)
A Trust Deed is a legally binding voluntary arrangement, available only in Scotland, which offers debtors an alternative to bankruptcy (sequestration).
It is designed to enable those who cannot repay their debts a way to establish, with the aid of a Trustee, a monthly repayment schedule based on what the debtor can afford to pay. The Trust Deed will last for a specified period, usually three years. When the specified term of the arrangement comes to an end, any remaining debts are written off.
Trust Deeds are only applicable where a debtor does not have enough disposable income (the surplus money after day-to-day living expenses) to meet his/her unsecured contracted credit repayments.
It should be borne in mind that Trust Deeds are a formal and legally binding arrangement between the debtor and a licensed Insolvency Practitioner (the Trustee) and should only be entered into accordingly.
Although considered an "informal" bankruptcy, a Trust Deed is still regulated by The Bankruptcy (Scotland) Act 1985.
If other criteria are met, a Trust Deed can be registered as "Protected". Protection has the added benefits of preventing creditors from taking legal action against you and also ensures that interest will frozen on your debts.