5 Mins
In Scotland, there are 3 main debt solutions for individuals or partnerships, the Debt Arrangement Scheme (DAS), Bankruptcy (also known as Sequestration), and the Protected Trust Deed (PTD). Currently, how effective is the third option? According to Money Advice Scotland’s recent report, they have identified certain concerns.
What is a Protected Trust Deed (PTD)?
In basic terms, it is when a debtor signs a binding document, called a Trust Deed, transferring their assets to a Trustee, who must be a licenced Insolvency Practitioner (IP), for the benefit of their creditors. They generally make affordable monthly payments for a specified period, usually 4 years. Any debt included in the Trust Deed and still outstanding after the distribution of the assets/contributions ingathered after the fixed period are written off.
To be ‘Protected’ creditors representing at least 2/3rds in value of debt must agree to its terms. Once protected, all creditors are bound by the PTD and cannot take action against the debtor to recover their debt.
However, a PTD can fail. If the debtor does not comply with the terms, for example, if they miss the agreed monthly payments, the Trustee can refuse to discharge the debtor. Without discharge, the debtors are not written off and creditors can once again pursue for the full amount of their debt, plus interest and charges.
Money Advice Scotland’s Report
In August 2025, Money Advice Scotland issued a report, “Failing the Promise of Debt Relief”, based on findings from freedom of information data on Scottish PTDs from 1 April 2024 to 31 March 2025. In their report, they state, ‘the data highlights serious issues around high failure rates, disproportionate practices among a small number of Insolvency Practitioners (IPs), and poor outcomes for both citizens and creditors.”
- 1,500 debtors were refused discharge in the period in question, of which 75% of cases came from just 2 IPs.Without full knowledge of the background of these cases, it is impossible to say what the underlying issues are. However, it is reasonable to think that PTDs may not have been the best solution for these debtors, thus the original money advise and assessment or ongoing communication and support, were not appropriate to these clients circumstances. The watchword here is if considering debt relief, it is important to seek guidance from a trusted, qualified money advisor who gives all debt relief options and indicates their suitability to the individual’s unique circumstances.
- £2.7 million of assets was ingathered in these PTDs of which only 6.5% went to creditors. A Trustee’s fees will be included in the documentation sent to creditors seeking the Trust Deed to become protected. These are generally a fixed fee for setting up and administering the PTD over the 4-year period and a fixed percentage of the assets ingathered. If the Trust Deed is the correct debt relief solution, the Trustee’s fee should never be disproportionately high compared to the return to creditors.
- The average failure time was 181 weeks. The average PTD runs for 208 weeks, so after being in the PTD for almost it’s entire term, debtors revert to full exposure to creditors, including interest and charges that can be applied for the period of the Trust Deed. Debtors may find themselves in exactly the same position they were in before signing the TD, thus receiving no benefit from the process.
- According to the report the median debt level was £12,155.10. Money Advice Scotland suggests there may be more appropriate solutions to deal with this ‘relatively modest level of debts’.
They conclude the report by making pleas to the Scottish Government and the Accountant in Bankruptcy to amend their current policies including suggestions like post- failure support protocols and higher minimum debt thresholds for entering into a PTD.
They also suggest stronger regulation and oversight of IPs. Having worked in the insolvency industry for many years, I know that IPs are already highly regulated. They are licensed, qualified professionals whose work is regularly and stringently monitored by their Professional Body. Additionally, it is open, in every case, to the scrutiny of creditors who have the right of objection to a process like a PTD from the outset. Greater creditor engagement could help ensure that only suitable PTDs are protected from the outset, improving outcomes throughout the process.
PTDs are just one of the statutory Scottish debt solutions, and in the right circumstances offer the best relief for debtors and outcome for their creditors.