What is a Protected Scottish Trust Deed?

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A Protected trust deed is a solution for residents of Scotland that have a significant amount of unsecured debt (usually £10K plus).
It is a government backed legislation to stop people from Only a licensed Insolvency Practitioner can set one up (Trustee) and this year (2010) an estimated 10,000 Scottish residents will use a trust deed as a solution to their debt situation.
A PTD (protected trust Deed) is designed to stop people from going bankrupt, or sequestration (the Scottish term for Bankruptcy).
If someone does not have any equity (usually their home) or assets and cannot afford to service the unsecured debt as they do not have enough Disposable income then a trust deed could be a solution.
This means they cannot service the unsecured debt.
An Example would be: Mr A has unsecured debts of £30,000 and is not a home owner.
His income is £1200 a month and his living expenses are £1000 BEFORE he services any monthly payments to his creditors.
Mr A's creditors want a total of £700 a month to service the interest and charges, and Mr A has been using credit cards to make the payments, and is struggling to make the payments.
On paper Mr A.
has no Disposable Income therefor is insolvent.
Mr A enters into a trust deed and his Creditors agree to a dividend payment and this reduces Mr A's monthly payments down to £200 a month.
The Trust Deed lasts for 36 months and after the 36 payments the rest of the debt is written off.
No credit is allowed during the term of the agreement, and after a person is released from a trust deed they will have to build up their credit file to get credit again.
Alternatives include a debt management plan which is an informal agreement but can be equally damaging to a persons credit file as defaults be shown.
Also none of the debt is written off in a debt management plan.
bankruptcy or sequestration is another alternative, which is off course more severe.
If someone has low income and low assets they may qualify for a LILA (low income low asserts)
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