A Protected Trust Deed enables you to make a formal proposal for payment to your
creditors through an Insolvency Practitioner. The proposed payments will be less than
the full amount of the debt owed but your creditors would be accepting the offer in full
and final settlement of their claim.
Your creditors have the right to vote whether to accept or reject your proposal but
where they vote to accept it, a legal agreement is created which is binding on you
and your creditors. The proposal will be tailored to meet your individual circumstances
but typically would involve you paying a monthly payment, a lump sum or some
combination of the two. When you sign a Trust Deed your assets are transferred to
the nominated Insolvency Practitioner, who becomes your Trustee. Any valuable assets
would be sold to help pay your creditors, but you are able to keep most of the things
you need for day-to-day living. Proposals can also take account of erratic income such
as overtime or bonuses.
You might consider a Trust Deed:
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To avoid Sequestration where that is considered too drastic a step and where
a realistic proposal for payment can be made.
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Where the option to make reduced payments would result in an unreasonably
long repayment period to clear the debts in full.
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Creditors will be bound by the arrangement even if they did not vote in favour
The Trust Deed will become Protected unless 1/3 in value or a majority in
number of creditors, vote against it.
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You will know from the start how many months you will be paying for
(usually 3 years if making monthly payments).
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It may be possible to make more favourable arrangements than under
Sequestration to retain assets such as the family home.
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There are fewer restrictions than apply in Sequestration e.g. to carry
on a business or hold certain public offices.
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Individuals may also feel it carries less of a stigma.
