Alternatives To Sequestration

Bankruptcy has always been a last resort for debt problems and there may be other options available to you.

Trust Deed

A Trust Deed is a voluntary agreement between you and the people or companies you owe money to to repay part of what you owe. As such, it is similar to the Individual Voluntary Arrangement (IVA) in England and Wales.

Entering into a Trust Deed will involve your trustee selling your assets - the things you own - and using the money raised to pay off part of what you owe. A Trust Deed will normally also include a contribution from your income for a specified period - usually 36 months, but this can vary.

Your trustee must be a qualified insolvency practitioner who will charge you for their services. You can choose your trustee and they must give you an indication of their charges as well as advice regarding alternatives before the Trust Deed is signed.

A Trust Deed is designed to last for a fixed period of three years whereas an IVA in England and Wales usually lasts for five years. At the end of this period, all remaining debts covered by the Trust Deed are completely written off and you are debt free.

To qualify for a Trust Deed you must be resident in Scotland, although your creditors can be elsewhere.

An ordinary Trust Deed is not binding on your creditors unless they agree to its terms. However a special type of Trust Deed - a Protected Trust Deed - is binding.

Protected Trust Deed

A Protected Trust Deed differs from an ordinary Trust Deed in that it is binding on all creditors.

This means that your creditors can take no further action to pursue the debt or to make you bankrupt. Similarly, it prevents you from applying for your own bankruptcy or for a debt payment programme under the Debt Arrangement Scheme.