Trust Deeds Scotland

A Scottish Trust Deed is an agreement between a debtor and a creditor to write–off or pay back a portion of the debt and evade bankruptcy. A trust deed is a form of government legislation regulated under the Bankruptcy Scotland Act 1985, whose main aim is to help people who are experiencing insolvency. To qualify for a trust deed, a person’s debt in relation to his or her income must prove genuine inability to repay it in a reasonable period.

Persons who qualify are Scottish residents, those struggling to pay their monthly bills, people facing repossession, those facing bankruptcy, those struggling to pay their credit card and loan bills each month, people with large amounts of unsecured debt, and persons who have fallen into arrears with their mortgage payments.

Approval and Repayment Process

Debtors who qualify for a trust deed must consult an insolvency practitioner who guides them and explains all the options available to them, based on their current financial situation. The qualified insolvency practitioner evaluates their income to debt ratio, taking into account factors such as mortgages, utility bills, tax, and other monthly expenses. With the income left over, the practitioner, by this time the trustee, subsequently prepares a debt repayment proposal and presents it to the creditors, detailing the amount of money the debtor is able to pay.

Download our Trust Deed guide here.

The repayment process consists of the debtor making lower monthly payments to creditors for up to three years, after which the remaining debt is written–off. The drafting may take around one month before presentation to the creditors for approval. The approval process in itself may take about two weeks, after which the two parties enter into a contract; however, creditors have up to five weeks to object to the loan repayment proposal.

This legislation helps people experiencing insolvency get back on the road to stability and financial freedom, while at the same time helps creditors get payment for a portion of their debts, as opposed to not receiving any payment at all when the borrower declares bankruptcy. In a situation where the creditors fail to reject or accept the proposal, or if less than half of them reject while the others accept, the debtor can begin making the proposed payments. After making prompt monthly payments for three years, the borrower is debt free, no matter the fraction of debt paid. However, certain sacrifices may be necessary along the way; for example, if the debtor owns a vehicle, bike, or expensive collection that he or she does not need for work, then he or she will have to sell it and assign the proceeds to the trust fund.


1. To avoid the seizure of property

2. Trust deeds enable debtors to repay what they can realistically afford

3. It is free to establish a trust deed

4. They protect debtors from constant harassment by creditors

5. Trust deeds allow companies to continue trading

6. They allow borrowers to be debt free after three years

7. They are private, thus borrowers do not face the public humiliation of declaring bankruptcy


1. The borrower’s credit rating is adversely affected

2. While in the trust deed, debtors cannot take further credit

3. Failure to make monthly payments forces the borrower to declare bankruptcy

4. Approval may depend on the debtor’s occupation

It is important to note that the deed does not cover all types of debts; for example, benefits over payments, student loans, mortgage, secured loans, fines, court penalties, ailment obligations, or forfeiture obligations. When it comes to choosing between bankruptcy and taking a Scottish deed, the question is not about which approach is better, but rather, it is about which option is most suitable for any given situation. Although both approaches are two of the most common insolvency solutions, they work in different ways. A qualified insolvency practitioner is able to give valuable advice on which approach is best for a given situation.

In summary, with a protected deed in place, debtors can focus on repaying their debt without worrying about additional action from creditors. All a borrower needs to do is pay the monthly payment to the trustee, who then submits the payment to the creditors covered by the deed.

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