Choosing the Wrong Firm Could Make Your Protected Trust Deed 65 Times More Likely to Fail

May 30, 2017

Late last year, we wrote about the worrying performance of some Protected Trust Deeds.

If you missed it, the headline statistic was this —15 percent of all Protected Trust Deeds (PTDs) closed last year were failures, with one large firm failing 88 percent of the cases they finished last year. That's almost nine out of every ten cases ending in failure!

The shocking statistics were revealed by the Accountant in Bankruptcy in its 2015/16 report and it powerfully illustrated the damage a handful of firms are inflicting on debt-laden Scots.

Of the 6,941 PTDs finished last year, approximately 1,000 were failures, which represents a failure rate of 15 percent. However, performance between firms varied hugely and, as we mentioned above, one firm's failure rate reached an eye-watering 88 percent, something later described by the Govan Law Centre as “appalling”.


What is a Protected Trust Deed?

A Protected Trust Deed is a statutory personal insolvency solution available within Scotland. In simple terms, it's an agreement between a debtor and their creditors, which includes making affordable monthly payments (usually for a period of four years) and contributing any of the equity in their assets such as their home. In return, your debts are completely written off at the end of the PTD — so long as the PTD hasn't failed.


What does a failed Protected Trust Deed mean?

A Protected Trust Deed failure means that, despite signing the agreement and often paying monthly contributions for a number of years, a debtor will not have their debt written off and will often end up in a worse financial position than they were in originally.

Right now, many debtors who signed a PTD are paying thousands of pounds to firms over a number of years only to have their PTD fail. Many end up owing far more than their original debt as their creditors can backdate interest when the PTD fails and none of their payments are given to their creditors

To see how PTDs are failing debt-laden Scots, read through our example Protected Trust Deed case study in our original blog.


Are all Protected Trust Deed firms the same?

As we discussed in our original article, the performance of insolvency firms varies immensely. While the worst firm in 2015/16 experienced a failure rate of 88 percent of Protected Trust Deeds they finished that year, the industry average was higher at 15 percent.

Now, six months on from our last article, we have the AiB’s latest 2016/17 statistics for our own firm, which allows us to benchmark our own performance against the other firms offering Protected Trust Deeds.

During the 2016/17 financial year, less than 1.5 percent of our finished Protected Trust Deeds were failures.

That makes our failure rate 65 times better than the worst firm and more than 10 times better than the industry average for last year.

Our service also benefited the creditors who received the promised dividend. In fact, creditors received, on average, 1.2 percent above the original dividend we promised them.

In short, not all insolvency firms are the same. Who you choose to help with your debt problems can be of huge importance.


How should you choose a Protected Trust Deed firm?

As you can see from the statistics above, choosing one firm over another can make the difference between successfully completing your Protected Trust Deed and becoming debt-free and having your PTD fail.

Debtors, therefore, need to carefully evaluate all available firms and select the one that is most likely to get them to the end of the PTD period and get their debts written off.

I strongly recommend you don’t base your decision solely on flashy websites, rock-bottom monthly contributions or simply how high up the Google search results the firm is.

Ask for statistics of previous cases and references to check how good they really are. Also, do your own research using the AiB's reports for an objective measure of their competence.


Are you struggling with debt?

Ultimately, the success of a Protected Trust Deed will come down to a mixture of the circumstances of the debtor and the competence of the insolvency practitioner. As we can see from the statistics, the difference between one firm and another is immense and it could mean the difference between a successful PTD and a failure.

If you are struggling with debt, it's essential you seek help as soon as possible. The more time an insolvency practitioner has to work with you, the more likely they are to achieve a positive outcome.

If you would like to discuss your options, our debt experts are waiting to help you. Please call our office or send us an email and we will help you in any way we can.

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GLASGOW LIVING WAGE EMPLOYERBarry John Stewart and George Dylan Lafferty are authorised to act as insolvency practioners in the UK by the Institute of Chartered Accountants of Scotland. Company Registration Number SC 477598 | VAT Registration Number 192 5146 03 | Data Protection Registration A1056203 | FCA Registration Number 766693 | Registered office: 2nd Floor Suite 148, Central Chambers, 11 Bothwell Street, Glasgow G2 6LY.