What is a trust deed?
A trust deed is a voluntary, legally binding agreement between you and your creditors (the people or organisations you owe money to). It is a formal debt solution available only in Scotland.
When you enter a trust deed, a licensed Insolvency Practitioner - known as a Trustee -takes control of your assets and manages the repayment of your debts on your behalf. You make a single monthly payment to the Trustee, who then distributes funds to your creditors.
A trust deed usually lasts four years. Once it is completed, any remaining unsecured debt that has not been repaid is written off.
Protected vs. unprotected trust deeds
There are two types of trust deed:
Protected trust deed:
If the majority of your creditors agree to the arrangement (or do not object within five weeks), your trust deed becomes 'protected'. This means creditors cannot pursue further legal action against you for the debts included.
Unprotected trust deed:
If creditors do not agree, your trust deed remains unprotected. Creditors may still take legal action against you, which means this option offers far less security.
How does the process work?
If you decide to proceed with a trust deed, here is what the process typically looks like:
- Speak to a licensed Insolvency Practitioner. They will review your income, outgoings, debts, and assets to assess whether a trust deed is appropriate for you.
- Your Trustee prepares the trust deed. This sets out the terms of the agreement, including how much you will pay each month.
- Creditors are notified. Your creditors have five weeks to accept or object to the arrangement.
- The trust deed is registered. If protected, it is registered in the Register of Insolvencies - a public record.
- You make monthly payments. These continue for the duration of the trust deed (typically four years).
- Discharge. Once you have completed your payments, you are discharged from the remaining debt covered by the trust deed.
What are the risks of a trust deed?
A trust deed is a serious legal commitment and it is important you understand the potential consequences before you proceed.
Impact on your credit file. A trust deed will be recorded on your credit file and will remain there for six years. This can make it harder to get credit, a mortgage, or even certain types of employment.
Your assets may be at risk. Your Trustee will assess your assets - including your home if you own one. You may be required to release equity from your property as part of the arrangement.
It is a public record. Your trust deed will appear in the Register of Insolvencies, which is publicly accessible.
Not all debts are included. Certain debts cannot be included in a trust deed, such as student loans, court fines, child maintenance, and secured loans (like a mortgage).
Your income may be monitored. If your income increases during the trust deed, you may be asked to increase your monthly payments.
Risk of sequestration. If you fail to keep up with payments, your Trustee can apply to have you made bankrupt (known as sequestration in Scotland).
Fees are involved. Insolvency Practitioners charge fees for administering a trust deed. These come out of the money you pay in, meaning less goes to paying off your debt.
What debts can be included?
A trust deed generally covers unsecured debts, such as:
- Credit cards
- Personal loans (including credit union loans)
- Overdrafts
- Store cards
- Catalogues
- Council tax arrears and utility bill arrears
Important: If you have a loan with Glasgow Credit Union, this would be included as a creditor in your trust deed. This means we would need to be notified and would be part of the process.
Please talk to us before you take any steps
We understand that financial difficulty can feel overwhelming, and it can be tempting to take the first solution you find. But a trust deed is not the right answer for everyone — and there may be other options available to you that are less drastic and have fewer long-term consequences.
As your credit union, our goal is to help you - not to profit from your situation. Before you enter a trust deed, we'd encourage you to get in touch with us so we can:
- Review your current financial situation with you
- Explore whether your loan repayments can be restructured or rescheduled
- Discuss whether a reduced payment arrangement may be possible
- Point you towards free, independent debt advice services in your area
Acting early gives you more options. If you are finding it hard to manage your repayments or are considering a trust deed, please do not wait - contact us as soon as possible.
Free debt advice services
Whoever you speak to about your debts, make sure they are a reputable, FCA-authorised service. Be cautious of any company that charges upfront fees or pushes you towards a specific solution before fully understanding your circumstances.
Free, impartial debt advice in Scotland is available from:
- Citizens Advice Scotland - www.citizensadvice.org.uk/scotland
- Step Change Debt Charity - www.stepchange.org
- Debt Arrangement Scheme (DAS) - a government-backed Scottish debt management scheme that may be an alternative to a trust deed -www.dasscotland.gov.uk
- Money Advice Scotland - www.moneyadvicescotland.org.uk
How to get in touch with us
If you're worried about debt or are considering a trust deed, please reach out to our team. We are here to help and everything you share with us will be treated with complete confidentiality.
- Via the Glasgow Credit Union app
- Raise a support request