What's the difference between an IVA and a Trust Deed in Scotland?

If you live in Scotland and you've been looking into ways to deal with unmanageable debt, you may have come across the term Individual Voluntary Arrangement (IVA). Perhaps a friend or family member in England has been through one, or you've seen it mentioned in an advert online. So what's the difference between an IVA and a Trust Deed and which one is best for you?

The short answer is that an IVA and a Trust Deed are very similar in what they do, but they operate under different legal frameworks and are available to residents of different parts of the UK. If you live in Scotland, a Trust Deed is the equivalent of an IVA.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a formal debt solution available to residents of England and Wales. It's a legally binding agreement between you and your creditors, where you agree to make affordable monthly payments towards your debts over a set period. At the end of the arrangement, any remaining unsecured debt is written off.

An IVA is overseen by a licensed insolvency practitioner who acts as your supervisor throughout the process. Once the IVA is in place, your creditors are prevented from taking further legal action against you, and interest and charges on the debts included in the arrangement are frozen.

What is a Trust Deed?

A Trust Deed is the Scottish equivalent of an IVA. It's a formal insolvency solution available exclusively to residents of Scotland, and it works in a very similar way. As part of a Trust Deed, you make a series of affordable monthly contributions towards your unsecured debts over a set period, and any remaining debt is written off at the end so long as you kept up with your payments towards the Trust Deed.

Your Trust Deed is managed by a trustee, who is a licensed insolvency practitioner. Once the Trust Deed becomes protected, your creditors cannot contact you, add interest or charges to the debt you owe, nor can they take or threaten legal action against you.

How do an IVA and a Trust Deed compare?

While both an IVA and a Trust Deed achieve the same goal, that of helping you escape unmanageable debt through affordable payments and eventual debt write-off, there are some important differences in the detail.

• Eligibility location: An IVA is only available if you live in England or Wales. A Trust Deed is only available if you live in Scotland (or have lived in Scotland within the past 12 months).
• Minimum debt level: To enter an IVA, you generally need unsecured debts of at least £15,000, although this is a guideline rather than a hard rule. For a Trust Deed, the minimum is lower at £5,000, making it a possible option to more people in debt.
• Typical duration: An IVA generally lasts for 60 months (five years). A Trust Deed typically lasts for 48 months (four years), meaning you could be debt-free sooner.
• Approval process: A Trust Deed requires creditors representing more than one-third of your debt by value to not object. This objection-based process can make approval more straightforward than the voting process required for an IVA.
• Public register: Both an IVA and a Trust Deed are recorded on a public register. An IVA appears on the Individual Insolvency Register maintained by the Insolvency Service. A Trust Deed is recorded on the Register of Insolvencies maintained by the Accountant in Bankruptcy (AiB).
• Credit rating: Both a Trust Deed and an IVA will have a negative impact on your credit rating. An IVA stays on your credit file for six years from the date it's approved. A Trust Deed also remains on your credit file for six years from its start date.
• Assets and property: If you're a homeowner, you may need to release equity from your property as part of the Trust Deed. This is the same with an IVA. How this works in practice will depend on your individual circumstances and will be clearly explained to you before you enter into a Trust Deed.

Can I get an IVA if I live in Scotland?

No, an IVA is not available to Scottish residents. If you live in Scotland and have unsecured debts of £5,000 or more that you're struggling to repay, a Trust Deed is the option that applies to you.

It's worth being aware of this because IVA advertising is widespread on social media and across the internet, and not all of it makes clear that it only applies to people in England and Wales. If you've clicked on an IVA advert and you live in Scotland, you'll need to speak to a firm that specialises in Scottish debt options – such as us here at Scotland Debt Solutions – instead.

What if I've recently moved between Scotland and England?

If you've recently relocated, which solution applies to you depends on where you currently live. If you've moved from England to Scotland, you would look at a Trust Deed rather than an IVA. If you've moved from Scotland to England, you will be looking at an IVA.

There can be some complexity around this, particularly if you entered into a debt solution before you moved. If you're in this situation, it's best to get professional advice to understand how your move affects your options.

What other debt solutions are available in Scotland?

A Trust Deed isn't the only option available to Scottish residents. Depending on your circumstances, you may also want to consider:

• Sequestration - Scotland's form of bankruptcy. This may be more appropriate if you have very limited income and assets, or if your debts are particularly severe.
• Debt Arrangement Scheme (DAS) - A government-backed scheme that lets you repay your debts in full through affordable monthly payments, with interest and charges frozen. Unlike a Trust Deed, a DAS doesn’t let you write-off any debt, but it also has a less severe impact on your financial record.

The best solution for you will depend on your total level of debt, your income, your assets, and your personal circumstances. There's no one-size-fits-all answer. That is why it is vital that you seek the help and guidance of a debt advisor who is experienced in the options available to those in Scotland. The team at Scotland Debt Solutions has been advising residents of Scotland as to their debt options for over 30 years.

How can Scotland Debt Solutions help?

We understand that navigating your debt options can feel overwhelming, particularly when there's so much confusing information out there about IVAs and other solutions that may not even be available to you.

At Scotland Debt Solutions, we specialise exclusively in helping Scottish residents find the right way forward. We'll assess your financial situation, explain all the options that are genuinely available to you, and recommend the most appropriate course of action for your circumstances.

If you'd like to talk through your situation in confidence, you can call our advice line on 0141 292 6587, or complete our free debt report to get started.