Advice for Scottish residents in Debt
If you live in Scotland you are eligible to enter into a three-year arrangement with creditors which involves making affordable monthly payments to a designated Trustee. This is called a Protected Trust Deed and, once in place, protects you from further action from creditors. Trust Deeds are more flexible and less costly than Sequestration, the Scottish equivalent of Bankruptcy.
Protected Trust Deed
A Trust Deed is a legally binding agreement between an individual, who is unable to pay their debts, and a Licensed Insolvency Practitioner who acts as the Trustee. The terms of the Trust Deed are normally based on either the sale of assets, contributions from future income or a combination of the two. The Deed is usually executed over a three-year period.
Normal household goods are excluded but non-essential luxury items may be sold. The Trustee will release any equity from your property if creditors cannot be paid from other sources.
Once the Trust Deed is signed, the Trustee places a notice in the Edinburgh Gazette and then sends the details of proposed payments to all creditors. Unless the majority of creditors object, it will become 'protected', binding creditors to its terms and preventing them from taking further action against you.
Advantages:
- Relieves the worry of a major debt
- The Trustee takes over all dealings with creditors
- Your job is not at risk
- You can control your affairs more than in the case of Sequestration.
Disadvantages:
- Existing arrestments are not written off
- Home owners could be forced to sell if creditors cannot be paid in full from other sources
- Debtors are forbidden to trade on their own account or hold directorships of a limited company.
Sequestration
Sequestration is the main insolvency process for Scottish residents and begins with a petition to the Sheriff Court. The petition can be lodged by:
- A debtor who owes more than £1,500 and demonstrates that they are insolvent
- Anyone who is owed more than £1,500 by the debtor
- A Trustee under a failed Protective Trust Deed
If the debtor lodges the petition, the Sheriff will grant the Sequestration. In this case the debtor will receive a 'warrant to cite', meaning they must appear before the Court on a certain date.
Sequestration can be avoided if the debtor can demonstrate that the debts have been settled. Failure to do this may result in a Sequestration Order being granted which will take effect from the date that the Court issues the warrant to cite.
What does Sequestration mean for debtors?
- The Trustee will sell all assets, excluding items needed for everyday living and tools of trade not exceeding £500 but including the debtor's home, in order to meet the creditors' demands.
- The Trustee may ask for voluntary contributions from surplus earnings.
- The debtor cannot obtain credit over £250 without disclosing their status.
- The debtor is forbidden to act as a director of a limited company, a Member of Parliament or a School Board.
- Assuming the debtor has co-operated with the Trustee, they will be discharged from Sequestration automatically after three years.
Complete the enquiry form, an advisor will call you back and will give you help and advice, their main aim is to find the best solutions for your own personal debt problems.
