A trust deed is a Scottish voluntary agreement with creditors but do not confuse it with an IVA that is in use in England and Wales.

Your assets are transferred to a trustee, an Insolvency Practitioner, who will sell them to repay your creditors. You will normally have to pay a contribution from your income for around 3 years.

Yes, the trust deed is not binding on your creditors unless they agree to its terms.

However, once the required amount of creditors do agree to the terms it will become a Protected Trust Deed. To become protected, it has to be accepted by at least half of your creditors that are owed at least one third (roughly 33%) of your total debt. To see how this works in practice, let’s look at the example below.

The total amount owed is £10,000 therefore creditors that are owed £3,334 between them have to agree.

If Creditors 1 and 3 agree the Trust Deed will be accepted and become protected because this amounts to £8,000 or 80% of the debt.

If only Creditors 1 and 2 agreed, but Creditor 3 disagreed, then the IVA would not succeed because between them they are owed only 30% of the money, i.e. £3,000.

If the Trust Deed becomes protected then it is usually binding on all of your creditors so they can’t take further action against you.

Your trustee will issue a letter of discharge if you have co-operated fully with the terms and you are discharged from any outstanding debts, subject to some exceptions, such as fines, penalties, student loans, any liability to fraud, etc.