What Are Scottish “Trust Deeds”?


Are you on the verge of declaring bankruptcy because of a large debt you can’t pay in full? If you’re struggling to keep up with monthly payments and considering other options, a trust deed can be the solution you need to get back on track. However, it only applies to you if you live in Scotland. But how does it work, and what are the advantages and disadvantages of using it?

We take an in-depth look at trust deeds and how it may be able to help get you in good financial shape.

What Are Trust Deeds and What Do They Mean?

Creditors and debtors can make a type of legal agreement to try and settle balances owed in what’s called a trust deed.

This usually happens when the debtor is in dire financial straits and do not have the means to catch up on monthly payments or to even pay the balance in full. A mediator establishes the terms in a trust deed, which can then become accepted and therefore becomes a binding contract between the creditor, the trustee and the debtor.

One requirement in a trust deed is that the debtor must make their assets available. In return, debtors can have their monthly payments significantly lowered and restricted to a certain number of years (usually four). As part of the agreement, the rest of the balance owed shall be written off if the debtor has successfully made all of their monthly payments within that period of time.

On paper, it seems that the lender is on the losing end of the deal. The agreement will write off all the remaining balance owed as long as the debtor makes the monthly payment.

Trust deeds are used by thousands of individuals living in Scotland each year, and has a high rate of success. They’re the last resort of people who are in deep debt, with bankruptcy being the other solution. Creditors, in this case would consider Trust deeds as the better arrangement than having the debtor file bankruptcy. This way, the company will have recouped some of their money back than have nothing at all.

When Can You Use A Trust Deed?

What Are Scottish "Trust Deeds"?

You must be a resident of Scotland and display a capability to settle the debt.

Appointing a trustee is the next step. Keep in mind that the insolvency procedure has legal standing, which means that the IP, or Insolvency Practitioner must be qualified and regulated in order for the trust deed to proceed forward.

Creditors will still have the final say on the decision as they consider if a trust deed provides a better solution that can give them a favourable return of money. The IP’s job is to understand what’s best for both debtor and creditor before allowing the trust deed to proceed.

Advantages Of Using Trust deeds

For debtors, a trust deed offers a way out when it becomes too financially overwhelming. In psychological aspects, the deed allows them to take control of their life again and hopefully make better decisions in the future.

More importantly, debtors can look forward to more realistic monthly amounts than the one set by the creditor. There’s also the fact that the remaining balance will be written off as long as the debtor pays the agreed amount on time.

What Are The Disadvantages?

What Are Scottish "Trust Deeds"?

Understandably, further expenditure with the creditor will be limited or cut off altogether. This allows debtors to focus on paying off their balance instead of adding to it. Only the unsecured debt that’s stated in the formal proposal shall be written off when the terms are completed.

The debtor’s personal details will remain on the Register of Insolvencies, and that will lead to effects similar to that of bankruptcy. Previous trust deeds must be declared in mortgage applications.

How Trust Deeds Can Affect Your Ability To Obtain Future Credit

The debtor must make the monthly payments within the agreed time frame (usually 48 months, or 4 years). Credit may not be obtained while the trust deed is in effect.

The ability to obtain credit will be much more difficult, even though the debtor has completed the plan without any issues.

Are There Alternative Methods To Repay Outstanding Debt?

Aside from trust deeds, debtors may also consider bankruptcy or turn to a debt arrangement scheme to pay off their balances owed. Each solution will have its own list of advantages and disadvantages depending on the debtor’s situation.


Trust deeds can be favourable for those who are at their wit’s end trying to keep on top of their debt. It’s best to discuss your financial situation closely with a professional and explore all the available solutions for the best results.

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