IVAs in Scotland - Trust Deeds

With more and more people seeking financial help with soaring unsecured debt, Individual Voluntary Arrangements (IVAs) are a popular alternative to Bankruptcy in England, Wales and Northern Ireland. However, in Scotland, IVAs are not recognised, although there is an alternative.

A Trust Deed is the Scottish equivalent of an IVA. In essence, they are both fundamentally the same thing, an alternative to bankruptcy, or sequestration as it is referred to in Scotland. In either case, when an individual is insolvent with significant unsecured debt, an application can be submitted via a licensed Insolvency Practitioner (IP) for a legally binding agreement with their creditors. This will allow the debtor to pay affordable monthly repayments for a fixed period, with any outstanding debt being wiped at the conclusion of the IVA or Trust Deed.

Differences between an IVA and a Trust Deed

However there are some differences between an IVA and a Trust Deed. First and foremost is that an IVA is only available to those residing in England, Wales or Northern Ireland, with the Trust Deed only being available to those in Scotland. Furthermore, it is usual that the IP that negotiates the Trust Deed will also be based in Scotland. Any equity in a property will normally have to be released (or an equivalent sum paid) in a Trust Deed.

Debt amount and length of agreement

Whereas and IVA will suitable to those with a minimum of £12,000 of unsecured debt, a Trust Deed may be agreed when an individual has £10,000 of debt. The other major difference is in the length of the agreement. An IVA will normally be in place for 5-6 years, with the Trust Deed being in force for 3 years.

Similarities between an IVA and a Trust Deed

Aside from these differences, they are essentially the same with regards other criteria. They both allow an individual to repay affordable monthly repayments, and they both usually require the individual to have debt with at least 2 independent creditors and with at least 3 lines of credit. Any outstanding debt will be cleared upon successful completion of the agreement. If either fail for any reason (such as a failure to complete the payments), then it could result in bankruptcy.