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 deed” means—
(a) a voluntary trust deed granted by or on behalf of a debtor whereby the debtor's estate (other than such of that estate as would not, under any provision of this or any other enactment, vest in the trustee were that estate sequestrated) is conveyed to the trustee for the benefit of the debtor's creditors generally, and

(b) any other trust deed which would fall within paragraph (a) but for -

(i) the exclusion from the estate conveyed to the trustee of the whole or part of the debtor's dwellinghouse, where a secured creditor holds a security over it, and

(ii) the fact that the debtor's estate is not conveyed to the trustee for the benefit of creditors generally because the secured creditor has, at the debtor's request, agreed before the trust deed is granted not to claim under the trust deed for any of the debt in respect of which the security is held,

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.

Trust Deed Minute

Notice of Trust Deed by Trustee under Trust Deed for Creditors of CHRISTINA MITCHELL, 25 Murrayhall View, Cambusnethan. Per James Iain Smith, Registers of Scotland.

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.

Recall of Trust Deed Minute

Notice by Trustee under Trust Deed for Creditors of CHRISTINA MITCHELL, 25 Murrayhall View, Cambusnethan, recalling Notice by said Trustee, registered 25 Oct 2016. Per James Iain Smith, Registers of Scotland.

Useful links

Sequestration

The Bankruptcy (Scotland) Act 2016 and the ROI - CAJR Guidance

Insolvency - Personal and Corporate (2012 Act manual)

Bankruptcy (Scotland) Act 2016 (external link)

Form C: Form of Notice of Inhibition by trustee under trust deed

Form D; Form of Notice of Recall of Inhibition by trustee under trust deed

This now contains space for more details about the date of recording of the Form C, and also clearly states that the prior notice has been recalled.

Form 7: Conversion of protected trust deed into bankruptcy