A protected trust deed is a binding arrangement between you and an insolvency practitioner who becomes your trustee. A trust deed document is signed by you and your Trustee to create a Trust Deed.
Your trustee acts for benefit of your creditors and will collect regular contributions from your surplus income (usually for a period of 48 months) or from releasing the value of assets you own to gather a pot of money that can be used to help pay your debts. Your Trustee will make regular dividend payments to your creditors and any balance of money you still owe after you have fulfilled the terms of your Trust Deed will be written off. Certain debts are specifically excluded from being written off such as certain types of student loans or court fines.
You will require to have a surplus income or assets that can be sold or disposed of to enter into a Trust Deed. The Trust Deed legally transfers your interest in your assets to your Trustee who can take steps to sell or realise the value in those assets to help pay your creditors. As with Sequestration there are a number of assets which are excluded from being included in your Trust Deed.
Shortly after signing a Trust Deed your Trustee will write to your creditors to advise them of the proposal to deal with your debts. If your creditors agree to this the Trustee can apply for your Trust Deed to be registered as a Protected Trust Deed with the Accountant in Bankruptcy which means that it is binding on your creditors at the date of singing your Trust Deed. If you comply with your Trustee and you fulfil all your obligations under the Protected Trust Deed you will be granted a discharge from your debts at the end of the process.
As long as you have cooperated with your trustee, once your trustee has paid the final dividend to creditors, remaining debt will be legally written off by your creditors (except for those specifically excluded) and you can no longer be pursued for them.
If your Trust Deed does not gain protected status it can potentially leave you open to action by your creditors. Insolvency Practitioners will often convert a Trust Deed that fails to gain protected status into a Sequestration in order to protect you from creditor action and to ensure that you receive a discharge from your debts.