What is a Protected Trust Deed in Scotland?

A trust deed is Scotland’s nearest equivalent to an IVA, but it is a separate procedure under the Bankruptcy (Scotland) Act 2016, with its own minimum debt, length and rules on how creditors can object. It sits between the Debt Arrangement Scheme, where you repay everything, and sequestration, Scotland’s bankruptcy. For all the Scottish options side by side, see debt solutions in Scotland.

Free, impartial money advice is available from MoneyHelper, StepChange, Citizens Advice Scotland and National Debtline, and it is worth getting before you sign anything, because trustees charge fees. See where to get free debt advice.

How does a trust deed work?

Only a licensed insolvency practitioner can arrange a trust deed and act as your trustee. The usual steps are:

1. The trustee works out what you can afford using the Common Financial Tool, from your payslips, bank statements, bills and a full list of your creditors.
2. Before you sign, the trustee must give you a trust deed information document and enough time to consider it. This has been a legal requirement since 20 January 2025.
3. You sign the trust deed, which passes your assets (apart from any agreed exclusions) to the trustee.
4. The trustee sends it to your creditors, who have 5 weeks to respond.
5. You make monthly payments to the trustee, who pays your creditors.

A trust deed lasts 48 months from the date it is granted. It can be shorter only if your debts are paid in full, and longer if you miss payments or it is agreed. For deeds granted on or after 1 July 2024, creditors must receive a first payment within 12 months, and later payments every 3 months.

Who can get a trust deed?

You must owe at least £5,000. This minimum is in the law itself. You also need a connection to Scotland: since 1 July 2024 you must have been habitually resident in Scotland, or had an established place of business there, at some point in the year before you grant the deed.

mygov.scot adds that a trust deed is generally for people who:

• do not rely on benefits as their only income
• could not pay off their debts in full in less than 4 years from their spare income
• are not already bankrupt with a trustee who has not yet been discharged.

A trust deed covers one person only. AiB’s guidance says joint trust deeds are not allowed, even for married couples.

How does a trust deed become protected?

A trust deed only protects you once it is protected. After the trustee notifies your creditors, they have 5 weeks to respond. The deed is treated as agreed unless a majority of your creditors by number, or creditors owed at least a third of your debt by value, object. It becomes protected once AiB registers it and a notice is added to the public Register of Insolvencies.

Once it is protected, your creditors cannot:

• contact you directly or chase you for payment
• add interest or charges
• take court action for the debts in the deed.

Since 1 July 2024, AiB can also remove protected status within 3 months if there was a material error.

What does a trust deed cost?

Your trustee charges a fee for setting up and running the trust deed, taken from your monthly payments and agreed with you before you sign. Fees vary between trustees and there is no legal cap. Trustees usually charge a fixed fee for administration plus a percentage of anything they realise, such as your share of a home.

AiB also charges statutory fees: £40 to register the deed, £40 for the notice on its register, and £120 for each 12 months it supervises the deed. These also come out of what you pay, so less goes to your creditors.

Before you sign, ask the trustee for the total fees in pounds, how much of your first year’s payments goes on fees, and how much your creditors are expected to receive.

What happens to your home, belongings and debts?

Your home

You may be able to set up a trust deed that does not include your home, if your secured lender agrees before you sign. If the home is included, the trustee may need your share of the equity to help pay your debts. If you own it jointly, the trustee can only take your share. If you later sell a home that was left out of the trust deed, the money left after the sale costs must be passed to your trustee.

Other belongings

Your trustee will need to know the value of your car and anything else of value, and some items may need to be sold. Ask before you sign what you can keep.

Which debts are included?

You can include any unsecured debt, such as overdrafts, credit and store cards, buy now pay later, payday and personal loans, and unsecured car finance. Missed payments on bills can be included if they happened before you signed.

Some debts can be listed but are not written off at the end: court fines, personal injury payments a court has ordered, secured loans such as mortgage arrears, and student loans. Ongoing bills, such as council tax, rent or mortgage, energy, phone, insurance and child maintenance, must be paid as normal.

What are the pros and cons of a trust deed?

What it can offer:

• Once protected, creditors cannot chase you, add interest or take court action.
• It is usually shorter than repaying in full, and unsecured debt left at the end is written off.
• Your home can be left out if your lender agrees.
• It avoids sequestration, and you deal with one trustee rather than every creditor.

The downsides:

• It is a formal insolvency. It goes on the public register and affects your credit file for 6 years.
• Fees can be substantial and come out of your payments.
• If creditors object, it does not become protected and gives you no protection.
• If your home is included, you may have to release your share of the equity.
• If you do not keep to the terms, you may not be discharged and could still owe the full debts.

How is a trust deed different from an IVA?

If you have read about IVAs, it is easy to assume a trust deed works the same way. The main differences are below. IVAs are only available in England, Wales and Northern Ireland: see can you get an IVA if you live in Scotland?

What happens at the end, or if it goes wrong?

After your last payment, your trustee applies to AiB for your discharge. Once you are discharged, creditors cannot chase you for the debts you owed before you signed, and the unsecured debt left over is written off, as long as you kept to the terms. The discharge stays on the Register of Insolvencies for 12 months after the trustee’s discharge, and the trust deed affects your credit file for 6 years.

Your trustee can refuse to discharge you if you have not kept to the terms, for example by missing payments or not declaring income. If that happens you continue to owe the debts, and creditors can chase them, go to court and add charges again. You can appeal to the sheriff. A trustee under a trust deed can also apply for your sequestration in some circumstances.

If your circumstances change, tell your trustee straight away rather than falling behind.

What to do next

1. If creditors are taking action, ask a money adviser about a 6-month moratorium first.
2. Get free money advice and ask the adviser to compare a trust deed with DAS and sequestration using your real figures. The trust deed guidance on mygov.scot is a useful checklist.
3. If you go ahead, read the trust deed information document, get the fees in pounds, and ask what happens to your home before you sign.

For the options in England and Wales, see debt solutions compared.