Reviewed 20th April 2021
Some employments contracts do include a clause regarding entering into a formal insolvency proceedings, but it does not necessarily mean that your job will be lost.
The industry in which you work will have a bearing on this – undertaking a formal insolvency route whilst working in the financial or legal sectors for instance, is likely to cause a problem, and often entails disciplinary procedures.
The Prison Service, Police and Fire Services all have a policy that excludes involvement in insolvency, so the first port of call in these instances is to check your contract of employment for all exclusions that apply.
If you are not employed in a potentially ‘sensitive’ job such as those mentioned above, there is a small chance that your employer will find out about your insolvency. They would need to be actively searching through the register of insolvencies published by the Accountant in Bankruptcy, or have looked through the Edinburgh Gazette to find out, however, so this is unlikely to happen. The main concern of your employer will be whether having a Trust Deed affects your ability to do the job, but you may find that other members of staff are in a similar financial position, and all you need to do is make your employer aware of your own situation.
Having unmanageable debt makes you vulnerable to corruption, particularly in the case of police and prison officers. Other jobs that require the handling of money or confidential information also expose you to threats of blackmail. It may be worthwhile speaking to someone trustworthy at work, to verify the company’s policy and gain some peace of mind. It is also advisable not to discuss your financial position with work colleagues, in case your employer inadvertently finds out about your situation.
A Trust Deed works by taking a proportion of your regular income from employment and paying off your debts over a period of time, usually four years. This means that you must be in employment to be eligible for this insolvency solution, as benefit payments are not allowed to be used to repay debt in this way. You can be eligible for a Trust Deed if you are self-employed, however, but even in these cases your work may come under scrutiny – in the case of council contracts, for example.
It depends on the type of work you want to do. If you aspire to be a prison officer, or work for the fire brigade or police service, the fact that you have entered into a formal insolvency situation will probably exclude you.
These services operate strict regulations and financial checks on anyone applying for employment. Your Trust Deed will be highlighted early on in this process, and your application will probably be unsuccessful.
The same applies to certain other professions as mentioned earlier. It is understandable if you are working with money or sensitive information, that an employer would not take on somebody with personal financial difficulties. As far as other jobs are concerned, it should not be an issue.
Contact one of our professional Insolvency Practitioners at Scotland Debt Solutions for more information, and to book a confidential consultation free-of-charge. We operate from five offices around Scotland, and have vast experience of the Trust Deed system. By taking out a trust deed with Scotland Debt Solutions, we can help stop the phone calls and letters from those you owe money to. We will take responsibility for liaising with your creditors and letting them you that you have entered into a Trust Deed, and that all future communication must go through us.
The food bank operator Trussell Trust has published a new report highlighting the extent to which the UK is experiencing an ongoing poverty crisis.
Christians Against Poverty (CAP) has published a new report outlining the extent of the financial and debt-related challenges that many thousands of people are facing in Scotland and across the UK.
Applying for a trust deed has been on my mind for some time but I’m concerned that all creditors may not agree to my trust deed? What if one of them doesn’t agree?
Yes, although a Trust Deed is not a court process the creditors you have made defaults with are likely to notify the credit reference agencies that you have missed payments. There will be an entry on the Register of Insolvencies that you are subject to a Trust Deed.
A Trust Deed can be setup very quickly. Once you have discussed your financial situation in full with an Advisor and taken time to consider that this is the most appropriate option taking all factors into account. The Trust Deed document and accompanying paperwork can be signed which then gives the Trustee the relevant powers to act on your behalf. The Trustee will make contact with all your creditors and from that point you can stop making payments to the individual creditors and pass all correspondence for the Trustee to deal with. Thus relieving you from the pressure instantaneously.
The Trustee will write to you every six months throughout the period of your Trust Deed to monitor and assess your Financial Position and your ability to maintain the contribution at the current level.
There are no initial setup or additional hidden costs in a trust deed. The Trustee’s fee’s and outlays for administering your trust deed are met from the contributions you pay in on a monthly basis or/and from the assets which may have to be realised in your Trust Deed. The Trustee is paid prior to making a distribution to your creditors. The Trustee’s fees are broken down into three categories, fixed fee, percentage of realisations and costs and expenses associated with the Trust Deed.
A protected Trust Deed is binding on your creditors. It means that if you comply with the terms of your trust deed then the creditors cannot take any further action against you to recover any debts you might be due to them. They cannot arrest your earnings or petition for your sequestration whilst you are subject to a Protected Trust Deed. Unlike an ordinary Trust Deed which is not binding on your creditors. If when presented with your Trust Deed Proposals more than half in number or one third in value of creditors object to your Trust Deed then it will fail to reach protected status.
The Trustee will write to you every six months throughout the period of your Trust Deed to monitor and assess your Financial Position and your ability to maintain the contribution at the current level. In addition to this the Trustee will explain at the outset of the Trust Deed that should you have any change in circumstance which will affect your ability to make a contribution you must update him with immediate effect. If you have a change in circumstance and notify the Trustee of this providing evidence to substantiate your change in circumstance. The Trustee will take all factors into account before making a decision as to whether to reduce, suspend, stop or infact increase your contribution. It may be depending on the circumstance that your Trust Deed period is extended or shortened or that you are able to suspend the payments until such time as your Income position improves.
The main differences between and IVA and Trust Deed are that one is an English Debt Relief process and the other is a Scottish debt relief process. An IVA can only be accessed by English and Welsh residents whereas Trust Deeds are only available for Scottish Residents. In an IVA you must have minimum unsecured debts of £15,000 whereas a Trust Deed is a minimum of £5000. The duration is also slightly different in that an IVA generally lasts for sixty months whereas a Trust Deed lasts for forty eight months.
I am a single mother of two children with a number of debts and loans, including some spiralling payday loans that are stressing me out. I have looked into debt management plans and trust deeds and it seems as though the trust deed is the best option but I’m not sure whether I can consolidate all my debts into one monthly payment? Can loans be included in this?
Our Scottish based team can help advise you on your debt problems.