A protected trust deed is a Scottish insolvency solution in which you transfer your estate to a trustee and pay a monthly contribution for an agreed period, after which the remaining included debt is written off. The word that matters is protected: once a trust deed achieves protected status, creditors bound by it cannot pursue the included debts separately. Before that point, it protects nothing.
Trust deeds are marketed heavily, and the marketing rarely explains the two things that decide whether one is suitable: what happens to your assets, and what happens if the arrangement fails. Both are covered below. Free, regulated advice in Scotland is available from Citizens Advice Scotland, StepChange and National Debtline on 0808 808 4000, and a free adviser can set up a trust deed just as a fee-charging firm can.
How protection is achieved
A trust deed starts as a voluntary arrangement between you and your creditors, drawn up by an insolvency practitioner acting as trustee. It becomes protected through a notification process in which creditors have a window to object. If enough of them do not object, it becomes protected and binds them all.
This is a meaningful difference from an individual voluntary arrangement in England and Wales, which requires creditors representing a majority to actively approve it. A trust deed turns on the absence of objection rather than the presence of approval. In practice, both routes deliver the same thing — an arrangement your creditors cannot step outside — but the mechanism is not identical, and it is one of the reasons the two should not be described interchangeably.
Contributions, duration and what is written off
You pay a monthly contribution from surplus income for the agreed term. At the end, provided you have met the terms, the remaining included debt is written off and you are discharged.
The contribution is set from a financial statement of income and essential expenditure — the same groundwork any debt solution requires. A payment that only works if nothing goes wrong is the most common reason arrangements fail, so the figure agreed at the outset should be one that survives a bad month.
The fees come out of what you pay
The trustee is an insolvency practitioner and is paid for the work. Those fees are met from the contributions you make, which means early payments do less to reduce the debt than people expect.
This is not a scandal — the work is real and someone has to do it — but it should be stated plainly before you sign, and a good adviser will do so. Ask two direct questions: what the fee structure is, and how much of the first year’s contributions will reach creditors. If either answer is vague, that itself is information.
What happens to your home
This is the question that decides suitability for most homeowners. Your estate transfers to the trustee, so equity in a property is part of the picture. Where equity exists, arrangements to deal with it have to be made — which may mean a longer term, a larger contribution, or a third party paying in a sum to reflect the equity.
Do not accept a general reassurance on this. Get the position on your specific property, with figures, in writing, before signing. Where equity is significant, the Debt Arrangement Scheme is frequently the better route to examine first, precisely because it involves no trustee and no transfer of your estate.
Vehicles, assets and what you keep
A vehicle of modest value needed for work or caring responsibilities is treated differently from one of significant value. Household goods and essentials are not the target. As with everything in this area, the thresholds are set in law and have been revised, so ask about current limits rather than relying on any figure quoted in an article.
If a trust deed fails
This is the risk the marketing understates. If contributions stop and the arrangement breaks down, the protection ends, the debts remain, and much of what you have paid may have gone on fees and distributions without clearing the balance. In some circumstances the trustee may petition for sequestration.
The way to manage this is not to hope, but to tell the trustee early when income changes. Variations are possible. A missed payment discussed in advance is an administrative matter; three missed payments discovered later is a failing arrangement.
How a trust deed compares
| Protected trust deed | Debt Arrangement Scheme | Sequestration | |
|---|---|---|---|
| Insolvency? | Yes | No | Yes |
| Debt written off | Yes, at discharge | No — repaid in full | Yes, at discharge |
| Trustee over your estate | Yes | No | Yes |
| Fixed term | Yes, agreed at the outset | Until debts are repaid | Contribution period where surplus exists |
| Public record | Insolvency register | DAS Register | Insolvency register |
| Main risk | Failure part-way, and equity in a home | Term too long to be realistic | Asset and occupational consequences |
Employment and public record
A protected trust deed appears on the Register of Insolvencies, which is public. Some occupations — particularly in financial services, and some roles requiring specific licences or professional memberships — treat insolvency as relevant. If your work might be affected, raise it before signing rather than afterwards, because it can change which route is appropriate.
Your credit file
Credit reporting is UK-wide, so the pattern is the same as for any formal solution: the arrangement is recorded and individual accounts are reported by their own creditors, with defaults running six years from their own default dates rather than from discharge. Our guides to checking all three credit reports free and practical ways to improve your credit score cover the recovery side.
Questions to ask before signing
- What is the total I will pay, and how much of it is fees?
- What happens to the equity in my home, in figures?
- What happens if my income falls — and how do I request a variation?
- What happens if the trust deed fails?
- Which of my debts cannot be included?
- Would the Debt Arrangement Scheme or sequestration suit my circumstances better, and why not?
A free adviser will answer all six without being asked twice. Any firm that will not answer the last one is not comparing options for you.
Common questions
Is a trust deed the same as an IVA?
No. They serve a similar purpose, but they are created under different legislation, the protection mechanism differs, and they are administered separately. Our guide to debt solutions in Scotland maps each Scottish route onto its nearest English equivalent.
Can I set one up through a free charity?
Yes. A free adviser can arrange a trust deed, and the statutory outcome is identical to one arranged by a fee-charging firm. That is worth knowing before responding to an advert.
What if a creditor objects?
Objection within the notification window can prevent protected status. If that happens, the arrangement does not simply collapse without alternative — your adviser will look at the other routes, and the objection itself often indicates something about how that creditor views the proposal.
Do I have to tell my employer?
Not generally, unless your role or professional body requires disclosure. Because the register is public, some employers in regulated sectors will find out regardless, which is why the question is worth settling in advance.
Can I be refused?
An insolvency practitioner will not proceed where a trust deed is unsuitable — for example where there is no realistic contribution, or where the asset position makes it unworkable. That is not a rejection so much as a signal that a different route fits, whether that is DAS, sequestration, or the Minimal Asset Process.
Next step
Take your figures to an approved money adviser and ask them to compare a trust deed with the Debt Arrangement Scheme and sequestration for your circumstances specifically. If you are earlier in the process, the first seven days sequence and the warning signs come first, and the compare debt options page sets the routes side by side.
Trust deed thresholds, fees, contribution rules and asset limits are set under Scottish legislation and are revised periodically. Nothing on this page is regulated debt advice, and no outcome described here is guaranteed. Confirm current rules with the Accountant in Bankruptcy or an approved money adviser before signing anything.