PROTECTED TRUST DEEDS
What is the advantage of a protected trust deed?
It stops all your creditors (even those who object to the trust deed) from chasing you for the money you owe them.
How does a trust deed become a protected trust deed?
Your trustee must do the following:
- put a notice (advert) in a publication called the Edinburgh Gazette.
- write to everyone you owe money telling them that you want a protected trust deed and sending them a copy of the notice in the Edinburgh Gazette.
The people you owe money to have 5 weeks to object starting from the date the notice appears in the Edinburgh Gazette.
Normally a trust deed automatically becomes protected unless your trustee receives written objections from either:
- a majority of your creditors, or
- creditors representing at least one-third of your debts.
What if a majority of my creditors object to my trust deed becoming protected?
If your creditors reject a trust deed that meets all the other conditions to become protected, you can petition for your own sequestration if
- you owe at least £1500, and
- you have not been made bankrupt in the last 5 years.
(See booklets AiB1 and AiB2.)
If you are not sequestrated, a trust deed will continue to run even if it does not become a protected trust deed. But creditors who have objected to it can still petition for your sequestration.
Is a protected trust deed recorded in the Register of Insolvencies?
Yes. And as this is a public register, anyone can ask for a search to see if you have a protected trust deed.(Unprotected trust deeds are not recorded.)
What happens if I do not co-operate with my trustee or keep to what I have agreed to in my trust deed?
They can petition for your sequestration.
Can I be sequestrated for any other reason even if I have a protected trust deed?
Sometimes, but it doesn't happen very often.
- Your trustee can petition for your sequestration at any time they think it would raise more money for your creditors.
- If one of your creditors thinks they can prove that they can get more of their money repaid if you are sequestrated, they can present a petition in the court for your sequestration - even if the trust deed is protected.
These are both very rare events indeed.
- If you run up more debt after you have signed the trustdeed, the people you owe the new debt to can petition foryour sequestration.
Can my trustee sell my house?
Yes. They can sell all the property you transfer by trust deed. But, if your house is jointly owned or if it is the family home, your trustee needs the permission of the other owner or anyone else who has rights to live in the house. (If the other owner refuses permission to sell, the trustee can go to court to try and force what is known as a division and sale. If this is granted, the house can be sold and your share of the money raised will go to pay off your debts. The other owner will get their share.)
Will credit reference agencies blacklist me?
Yes, as your trustee must advertise your trust deed in the Edinburgh Gazette before it can be protected. It is also entered in the Register of Insolvencies when it is protected.
When will I be discharged from my debts?
It will say in your trust deed how long it is to run for and when you will be discharged. Normally it is 3 years from the date you sign it (though it can be 4 or 5 years). But unlike in a sequestration, this discharge is not automatic. Your creditors have to discharge your trustee before you can be discharged. This means a protected trust deed may still remain open in the Register of Insolvencies for some time after the 3 years.
Your discharge in a protected trust deed is usually binding on all your creditors. This means they can't chase you for the money you owed them when you signed the trust deed.
But there are 2 exceptions. These are:
- debts not covered by the trust deed (like overpayment of social security); or
- if a creditor who objected to the trust deed can prove in court that he would have got more of his money back if you had been made bankrupt. This is a very rare event indeed.
(If the trust deed fails to become protected, your discharge does not stop creditors who objected to the trust deed in the first place still chasing you for the money you owe them.)
Do I get my property back when I get my discharge?
Once you have transferred assets to your trustee, it is his duty to sell them for the benefit of your creditors. Any assets or money left over after all the expenses and debts have been paid should be returned to you.