Why is a Protected Trust Deed a legally binding agreement

It’s possible you may have heard someone refer to the Protected Trust Deed as a legally binding agreement, and wondered what the phrase actually means.

Well, it stems from the fact that a Protected Trust Deed forms part of the Bankruptcy Scotland Act 1985 (amended April 2008), which states that once the Trust Deed has received a ‘Protected’ Status all parties are bound by its terms.

Quite simply, the The Bankruptcy Scotland Act lays out the legal framework, or rules, within which the Trust Deed will be initially set up, how the Trust Deed will then become Protected and then detailing how the ‘Protected’ Trust Deed must be supervised by the Trustee.

So the The Bankruptcy Scotland Act (amended April 2008) gives everyone involved with the Protected Trust Deed the assurance that the Trust Deed will conform to a predetermined legal structure which, in turn, gives benefits to both sides.

The creditors can take comfort from the fact that an independent financial expert, in the form of an insolvency practitioner, has subjected the applicant’s financial circumstances to a significant level of scrutiny, and has concluded that, in his opinion, the best financial return for all creditors would be via a Protected Trust Deed, rather than making the applicant bankrupt.

The creditors also have the benefit of knowing the agreement will be administered by an independent Trustee, which in turn means they will receive their ‘fair share’ of any repayments made by the Trust Deed applicant.

The creditors also have the assurance that the Trust Deed applicant will be legally obliged to inform the Trustee of any improvements in his circumstances throughout the term of the Protected Trust Deed, which gives a creditor peace of mind that the applicant will indeed repay more of his outstanding debt should circumstances improve.

The Trust Deed applicant has several benefit too. For instance, the assurance that once the Trust Deed has become ‘Protected’ the creditors forfeit the right to take any legal action for the recovery of the debt, so long as the Protected Trust Deed agreement is maintained.<.P>

The applicant also enjoys the benefit of only having to repay what they can afford, without the worry of a creditor ‘braking ranks’ and insisting on higher payments ‘..or else’. Once a Trust Deed has become Protected, even the creditors that may have rejected the Trust Deed are legally bound by the Protected Trust Deed’s terms

But possibly the greatest benefit to the applicant is the prospects of the debt being considered completely settled as soon as the Protected Trust Deed has completed successfully, which is usually after just 3 years.

In the vast majority of Trust Deeds, the applicant will not have managed to repay the whole debt by the end of the Protected Trust Deed term, and the remaining unpaid debt will be legally written-off and the applicant will be considered LEGALLY DEBT FREE.

All of the above reasons support the notion that having the Protected Trust Deed as a Legally binding agreement represents a huge advantage to the debt solution.