Rules on protected trust deeds
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The rules on protected trust deeds are fairly straightforward in principle although in practice they have to be monitored by a qualified licensed insolvency practitioner who will oversee the smooth running of any protected trust deed. However, there are many other aspects to a protected trust deed which need to be considered when applying and when a protected trust deed is granted.

In simple terms a trust deed will consolidate a debtor’s unsecured debts and the insolvency practitioner will then formulate a monthly repayment plan, taking into account the debtor’s cost of living and income, which will normally take place over a 36 month period. All creditors are repaid on a pro rata basis out of the payments made by the debtor over the 36 month period. So how do you agree a protected trust deed?

Upon the appointment of a licensed insolvency practitioner a report will be produced, as detailed above, which will show total unsecured debts and income together with a suggestion as to a monthly payment plan. A copy of this report will be sent to all creditors who will then have the opportunity to agree or disagree or even modify the proposal. Under Scottish law a non-reply from a creditor will be deemed to be acceptance of the report and the trust deed plan and so long as no more than 1/3 of the total debt is rejected by creditors a protected trust deed can be put in place.

While a creditor can request a modification of a trust deed proposal, these potential modifications cannot be implemented without the agreement of the debtor. After the 36th month period is up, all remaining debts within the trust deed are written off and the customer will then be able to “start again”.

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