IVA in Scotland: Scottish Trust Deeds

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What is an IVA in Scotland?

If you’ve started asking for guidance about your debts, it probably didn’t take long before you heard of an IVA or a Protected Trust Deed.

However, if you’ve talked to anyone other than an experienced debt adviser about an IVA or Trust Deed, chances are you may be a little confused about the differences and even, worse, what you have heard may not even be accurate.

What is the biggest difference between an Individual Voluntary Arrangement and a Protected Trust Deed?

Individual Voluntary Arrangements are only available to residents of England and Wales, whereas Trust Deeds are only available to residents of Scotland. You must have been a resident in Scotland in the last 12 months to qualify.

To start with, both of these options are effective strategies for dealing with debt and avoiding sequestration, but they are both very serious undertakings and should only be considered after discussion with an experienced debt adviser who can guide you through the pros and cons of a Trust Deed.

In essence, they are a formal legal agreement between you and your creditors to pay back your debt using an Insolvency Practitioner as a Trustee and mediator. However, their power lies in the fact you only pay back what you can afford and after a set period of time the rest of your debt is written off.

What are the other differences between an IVA and Trust Deed?

• An IVA usually lasts for a typical period of 60 months (5 years). Trust Deeds on the other hand usually last 48 months (4 years), meaning Scottish residents can gain a more favourable outcome a lot sooner. However, this is one area where advice from an IVA or Trust Deed specialist is necessary because there are circumstances where you have to make additional payments beyond this ‘typical’ period.

• With an IVA, once it is granted all of your assets must be transferred to your Trustee and you are automatically protected from legal action and pursuit from your creditors. With a Trust Deed, your Trustee has to apply separately to have it ‘protected’ so you can have a Trust Deed without it. This can be useful if you have certain assets that you wish to prevent being part of the Trust Deed, but could cause problems with creditors if they believe you are holding back assets which could pay off your debts to them. As a result, they could knock back the application for your Trust Deed and initiate sequestration. This is quite a complicated area and you need professional Trust deed on all the potential ramifications of doing it.

• An IVA will not be published in the London Gazette, however, a Trust Deed will be advertised in the Edinburgh Gazette.

Apart from these few differences, IVAs and Trust deeds are remarkably similar:

• You should owe money to two or more creditors
• Your contributions are based on your ability to pay and you need to have an adequate monthly disposable income
• Only unsecured debts can be part of the agreement
• The interest and charges on your debts are usually frozen
• Any unpaid debts at the end of the arrangement term are written off giving you a completely fresh start
• Both IVAs and Trust Deeds are a good alternative if you cannot opt for bankruptcy because of your job
• Both IVAs and Trust Deeds are recorded on a public register
• Your credit record will be affected by your IVA or Trust Deed and they will appear on your credit file for a minimum of 6 years.

Both IVAs and Trust Deeds have helped thousands of people find a way out of their debt problems, but you need to weigh up the pros and cons with the help of an experienced debt adviser. Remember that alternative solution exist that may be more appropriate for you needs. Solutions such as the Debt Arrangement Scheme.

Everyone’s financial situation is unique and there are no set rules for which option is best under which circumstances. Choosing a reputable company will enable you to make an informed decision that feels right for you