By Alexandra Harper 
If your debts are increasingly difficult to manage, understanding your options is the best way to recuperate control. A Protected Trust Deed is one way to manage them, but here are the basics to help you understand if a PTD could work for you.
What is it?
A Protected Trust Deed or commonly referred to as a Scottish Trust Deed, is a recognised and legally binding debt resolution that is only available to those who live in Scotland. It is intended to assist individuals who are battling with overwhelming debts and need an organised system to regain financial control.
A Protected Trust Deed (PTD) works similarly to an Individual Voluntary Arrangement that applies to the rest of the UK. It grants an alternative to complete bankruptcy. It allows you to have protection from creditors whilst you make reasonable reimbursements.
How do I qualify?
To qualify for a PTD, you usually need to have over £5,000 of unsecured debt, in arrangements such as credit cards, loans, overdrafts or payday loans.
These trust deeds can be voluntary, however, to receive legal defence against creditors, it has to be made ‘protected’. For it to be ‘protected’ you need to have approval from creditors who represent at minimum, a third of your entire debt.
What happens once it’s set up?
Once a PTD is arranged, interest and fees on your debt are suspended. This means that the total of debt that is owed cannot increase further.
How do the payments work?
Once set up a single scheduled payment can be made. This is calculated based on what you can reasonably afford after monthly necessity costs for living are considered.
How long will it last?
PTD’s usually run for 4 years on average. During this time an insolvency specialist handles the plan on your behalf and deals with the creditors directly.
At the end of the term that was agreed, if you have kept strictly to the payment plan, remaining and any unsecured debt included in the PTD is written off. This not only gives you the chance to have a fresh start but lets you move forward with your finances without overwhelming debt pressure.
Will it affect my credit score?
A PTD will affect your credit score for 6 years from the start date of the PTD. The details of your PTD will be documented on the public Register of Insolvencies for at least 5 years.
Is it the right option for me?
Below is the list of objectives that indicate whether a PTD may be right for you:
- You are a Scottish resident
- You are reliant on credit cards or overdrafts
- You have at least £5,000 in debt
- You’re in debt to numerous creditors
- You’re contacted by creditors frequently about outstanding fees
- High Interest Rates and repayment charges are making it difficult to gain financial control
Recap on the Benefits:
If it becomes legally binding, both you and the creditors must adhere to the contract, meaning they have no entitlement to contact you or take any more legal proceedings.
Monthly payments based on what you can reasonably afford can make unmanageable amounts feel consolidated and controllable.
Debt cannot grow; any interest rates or added fees will be frozen.
After the final repayment term, the outstanding debt may be written off, allowing you to move forward.
You don’t have to personally handle creditors, a trustee is appointed to do this for you, whilst protecting the interests of both parties involved.
What Should be Considered beforehand?
A PTD only protects debts that are unsecured, this does not include mortgages, car loans and student loans. Those must be managed separately.
Impacts on credit ratings will be affected for the duration of at least 6 years however, after the dissolution of the remaining debts, your credit rating can begin to improve.
If there is adequate equity in your home, the trustee will take it into consideration when assessing your repayments. It is important to note that equity in your property can boost the total creditors receive back from you.
If you have little to no equity in your home, it is unlikely your property will be taken into consideration.