Trust Deeds

Trust Deed

A trust deed is a legally binding voluntary arrangement which offers an alternative to sequestration (bankruptcy) and is available only in Scotland. The following definition of 'trust deed' can be found in section 228(1) of the Bankruptcy (Scotland) Act 2016:

Trust deeds consist of a formal and legally binding agreement between the debtor and a licensed insolvency practitioner (the trustee). The trustee negotiates with the creditors and one payment only per month is made out of the debtor’s surplus income. Trust deeds normally last for three years, but the inhibitory effect lasts for five years unless recalled.

Although considered an “informal” (non-judicial) bankruptcy, a trust deed is still regulated by the Bankruptcy (Scotland) Act 2016. A form of notice of trust deed as prescribed by the above act may be recorded in the RoI.

A trust deed may be granted "protected" status. This protected status of the deed means that the creditors are unable to petition for the debtor's sequestration during the period that the trust deed subsists, and repayments have to be pursued via the trust deed arrangements. From a registration perspective, the considerations are generally the same as for a trust deed, provided that an application for registration does not indicate any concern about (a) the trust deed's constitution, or (b) whether the property in question can be validly transacted with by the trustee.

Notice of Recall of Trust Deed

If the debtor settles his debts before the end of the term or if the trust deed has ceased to operate, the trustee can register a further notice recalling the earlier notice of trust deed. This is per the terms of schedule 4, para. 3(3) of the 2016 Act.