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.