The law recognises that you may not be able to pay your creditors in full, either now or in the future. You can therefore declare yourself bankrupt to prevent your creditors taking any further action against you, but in turn, you must surrender certain assets to the Trustee who must be appointed to deal with your financial affairs. If you can pay a contribution from your earnings, you will be expected to do so. Your contribution will usually last for four years.
Entering a protected trust deed is a form of bankruptcy in Scotland. A PTD is entirely your choice, and you choose your Trustee.
An insolvency practitioner (IP) must be appointed as Trustee to deal with your estate – your assets and your liabilities – and the IP acts like a referee. Dunedin Advisory’s IPs are qualified to act as your Trustee and our aim is to make sure that everyone is treated fairly in the process.
If you acquire any windfall assets in that four-year period, such as a lottery win or an inheritance, you must declare these to your Trustee.
Your Trustee will have legal powers to look back at transactions that you have entered in the years before the bankruptcy, to make sure that you have not given assets away or to see if you paid one debt in preference to another. We might be able to get the asset or payment back.
Before deciding which procedure is right for you, check your contact of employment. Signing a trust deed may have an impact on your job and your ability to contribute.
The benefit of the process is that you will be discharged from your debts at the end. That means that the creditors cannot ask you for money towards the debts that were included in your trust deed and you stop paying your contribution.
You won’t be discharged from any of the following debts however, and you will need to continue to pay these as part of your PTD, or arrange to start paying them again at the end:
- Court fines
- Liability incurred by fraud (including benefit fraud)
- Student loans
You make the decision to enter this form of bankruptcy. You sign a legal document – a trust deed – appointing one of our IPs as Trustee, and setting out the terms on which your creditors will get some of their money back. It’s binding as soon as it is signed and you can’t change your mind. We will then tell the creditors the terms of the trust deed you have agreed, and they will decide whether to accept these terms or not. If they do accept, by two thirds in value or the majority in number, then your trust deed becomes protected, and your creditors cannot take any further legal action against you.
Please be aware that if they do not agree, you may end up being sequestrated, although this only happens occasionally. Signing a trust deed tells your creditors that you are apparently insolvent, and if a creditor, who is owed £3,000 or more wishes, before the trust deed is protected.
If you can contribute from your earnings, you will be expected to do so for a period of four years. We will agree the amount with you before you sign your trust deed.
If you have assets that can be sold by your Trustee, these will be realised. We will discuss with you how we will do that.
A PTD is a “softer” option than sequestration. It’s voluntary, for a start. There are not the same restrictions as there are with sequestration – there is no bar on new credit for example. Provided you do as your Trustee asks throughout the PTD, you can expect to be discharged after four years’ worth of contributions have been made and any assets realised.
There is no substitute for detailed advice, tailored to your circumstances. Contact us and we will arrange to meet you, free of charge, for a discussion on what your options may be.