Understanding the recent insolvency regulation reform
September 18, 2023
A Protected Trust Deed can be used by Scottish residents as a voluntary but formal arrangement to pay an affordable amount of disposable income to repay an element of unsecured debts. In a Protected Trust Deed, the debts that cannot be repaid are written off.
A Protected Trust Deed (“PTD”) allows an individual to take control of their debts and negotiate an agreement with their creditors, leading to a future free of debt.
A PTD is a legally binding agreement, which freezes interest and charges on unsecured debts and allows an individual to agree a sum towards their debt over a period of 4 years. The agreement will include a monthly agreed contribution from income at the time of signing the Trust Deed.
If breathing space is required to allow an individual to sign a Trust Deed or obtain further advice, a Moratorium can be applied for. The Moratorium is registered on a public register, being the Register of Insolvencies, and stops creditors taking any action during the period being 6 months.
A PTD is a straightforward way to make an affordable arrangement with creditors which will provide debt relief for a period of normally 4 years.
An individual who qualifies for a PTD initially signs a Trust Deed with a Trustee (a qualified insolvency practitioner). The Trustee’s role is to administer the PTD and make payment to creditors from the monies ingathered.
Prior to signing the Trust Deed, the Trustee will assess the level of monthly contribution to be paid during the 4 year term. If the individual has any assets, an agreement will be made as to how the assets will be dealt with by the Trustee. This will form the basis of the Trust Deed proposal issued to creditors.
The Trustee will contact all known creditors to advise of the signing of the Trust Deed and advertise the Trust Deed in a public register, being the Register of Insolvencies. Creditors have 5 weeks to agree or reject the Trust Deed proposal. If the majority number of creditors, or creditors amounting to at least two thirds of the total debt, are in agreement with the Trust Deed proposal, the Trust Deed gains Protected status. This means that creditors are legally bound by the terms of the agreement and are prohibited from raising action against the individual.
Once the agreement has been paid, the individual will receive their discharge from the PTD and, in turn, from the debts included in the agreement. Creditors included in the PTD are unable to pursue the individual for any shortfall on their debt.
If the agreement is not adhered to for any reason, the Trustee can dissolve the PTD, meaning that the debts revert to the individual, or they can apply for the sequestration (bankruptcy) of the individual.
For more information on personal debt and Protected Trust Deeds, we offer an initial free consultation to review the situation and make recommendations on the best way forward. If we think that a Protected Trust Deed is the best route forward, our specialists can support the individual at every step of the way through the process.
For information on fees in relation to a Protected Trust Deed, click here.
“We approached Steve Parker of Opus when our business, which was in the hospitality sector, began to get into difficulties. Steve was helpful and supportive and gave clear and timely advice regarding our options. Resultantly the company was placed into Administration which was handled by Steve and his team in a fair and very professional manner. As a consequence we were able to emerge with a much slimmed down business which has flourished over a number of years allowing us to build up considerable reserves sufficient to see us through any future period of uncertainty”