The Scottish Government have introduced changes to the way Scottish Trust Deeds will operate and be administered. A Scottish Trust Deed is a formal debt solution agreed between a debtor and his or her creditors. It is a method of resolving debt problems where people have reached a stage where they can longer afford to repay their debts.
The rationale behind the changes
The objective of the new legislation is to improve transparency within the Trust Deed process and to find a better balance between the interests of the debtor and their creditors. The Trust deed process is relatively straight forward and is an effective debt management tool for people with serious debt problems. There are a number of specific changes to the legislation:
- The minimum debt threshold has been reduced from £10,000 to £5,000
- A trust deed will now take on the status of protected as soon as it is registered in the Register of Insolvencies, this used to take five weeks after creditors were informed that a protected Trust Deed was sought. This helps protect the person in debt as it means that creditors cannot take legal action once the Trust Deed is protected.
- Trustees who administer the Trust Deed process will now have to set a fixed fee for their services rather than the hourly fee system that operated before. This will significantly reduce the costs of processing and administration.
- The Trustee will also have to be clear to creditors from the beginning of the process what their fees will be and how they will be taken throughout the process.
- There is no longer the requirement to advertise the details in the Edinburgh Gazette as this will now be covered by being on the Register of Insolvencies.
- There will now be more of an obligation on Trustees to show that they have gone through the process to ensure that a Trust Deed is in fact the best and most appropriate solution for the debtor with full regard to their particular circumstances.
- The term of a Trust Deed will move from three years to four years but this excludes people with a lump sum Trust Deed or those with an Equity only Trust Deed.
- No contribution will be allowed to be paid by the debtor from their social security benefit, towards their Protected Trust Deed.
- The Accountant in Bankruptcy who administers Trust Deeds on behalf of the Scottish Government will have more powers in deciding not to accept proposed Trust Deeds that are not in the best interests of the person with the debt problem.
Information and advice
There are many benefits of a Scottish Trust Deed but it’s important that anyone with a debt problem who is considering a Trust Deed as a possible solution is fully aware of the new legislation and what the changes may mean to them. A Trust Deed is only one of many possible debt solutions available to people and it is vital that people who are experiencing financial difficulties have all the facts to hand and details of solutions available in order to make the right decision. So if you’re still asking the question what is a Trust Deed then you need to gather the information and probably need advice.
It is always advisable to seek advice from an experienced debt advisor for expert help and guidance in relation to Trust Deeds and debt advice. Additional information can be found at the Scottish Government website.