That last question is the one nobody answers. It has a real answer, and part of it is not comfortable reading.

A missed payment is also not the same thing as a failed deed. What happens if you miss a payment on your trust deed covers the ground between falling behind and losing the protection.

There is no moment in the Bankruptcy (Scotland) Act 2016 marked failure. In practice the word covers three separate events, and lumping them together is what makes the subject frightening.

The three, side by side

The first happens at the very start, before protection exists. How many creditors have to agree to a trust deed explains the objection thresholds it turns on.

The third is what people usually mean

Somebody who says their trust deed failed almost always means the payments stopped and the discharge did not come. That is the route most of this page deals with.

You do not get it back. The Accountant in Bankruptcy’s own information document, the one your trustee had to give you before you signed, says that if the arrangement is cancelled you will not get back any money you paid.

Where those payments went

Contributions go into the trust estate rather than to your creditors directly. Section 183(1) is an exhaustive list of how a trustee may be remunerated, and the word it turns on is only: a fixed fee, a percentage of the estate realised, and outlays.

What is left funds a dividend, and section 176 only requires one where funds are sufficient, after fees, outlays and a contingency allowance, to yield at least 5 pence in the pound.

The honest limit of what anyone can tell you

Money that reached a creditor as a dividend has been paid to that creditor. What no source spells out is exactly how a creditor must account for a dividend it already received once it starts chasing you again.

So ask for two documents. A written balance from each creditor, and your trustee’s statement of realisation and distribution on Form 7, which shows what was actually paid out and to whom.

Check one against the other. That is the only way to see whether a revived balance has been reduced by what was already distributed.

The parallel from the diligence side

The same principle applies to money taken by an earnings arrestment before a trust deed was protected. It is credited against the debt rather than refunded, and the reader has to ask for the updated figure.

None of that is a reason to stop paying quietly. How much a trust deed costs in Scotland explains how the fees are set and how you can have them audited.

You are left with an ordinary trust deed, which binds only the creditors who agreed to it. A creditor who refused to accede can sue you, do diligence and petition for your sequestration as though the deed did not exist.

Two ways it goes wrong at the start

Objections from a majority in number of notified creditors, or from creditors holding not less than one third in value, defeat protection inside the five-week window. Silence counts as accession, so it takes active objection.

The other route is procedural. The trustee has four weeks from the end of the objection period to apply to AiB, and missing that deadline is fatal unless a sheriff directs resubmission.

What you should ask about immediately

• Whether the deed can be presented again, and on what timetable.
• Which creditors objected, and what their objection was about.
• What protects you from diligence in the meantime, because an unprotected deed does not.

Where a dwellinghouse exclusion had been sought and protection then fails, AiB tells trustees to consider what steps are necessary in those circumstances. What happens between signing a trust deed and it becoming protected sets out the sequence.

It can, but only on a narrow ground and only for a short window. Where a material error or irregularity is identified within 3 months of the date of protection, the trustee must notify AiB, which decides whether protection should be removed.

How the decision is made

Sections 171A to 171C, in force from 1 July 2024 under SSI 2024/198, require AiB to weigh whether the error should have prevented protection in the first place, the impact on creditors, and the consequences of removal.

The trustee then notifies all known creditors, other than a secured creditor who signed the exclusion. Protection ceases 14 days after AiB’s notice unless a review application is made, and there is a right of review.

Two pieces of good news in the same provisions

Removal does not invalidate what the trustee already did. It also does not prevent the deed being protected again, if the conditions are met afresh.

This is a paperwork failure rather than a payment failure. It is worth separating from everything else on this page, because it is not your fault and it is often fixable.

The debts remain outstanding and your creditors stop being treated as having accepted the deed. Since 1 July 2024 a trustee cannot bring that about alone, and has to obtain the Accountant in Bankruptcy’s agreement first.

The process, and the deadlines that protect you

The trustee applies on Form 5A under section 184A explaining the reasoning, and AiB confirms agreement or disagreement. Where AiB disagrees it will discuss the matter and, failing resolution, issue a direction that can be appealed to the sheriff.

If refusal is agreed, the trustee must write to you within 7 days with the reasons, confirmation that the debts remain outstanding and your right of appeal to the sheriff, copying AiB within 21 days.

Section 172(2) then means creditors cease to be deemed to have acceded, and AiB’s guidance is blunt about the effect: creditors are free to enforce debt recovery action.

What is not a proper reason to refuse

• A change of circumstances that stops you paying a contribution.
• Extenuating circumstances preventing you continuing to meet your obligations.
• Assets realising less than the trustee first estimated.

Those three are listed by AiB itself. The test in section 184A is an unreasonable failure to comply or a lack of co-operation, and losing your job is not the same thing as refusing to engage.

What keeps you on the right side of that test is disclosure, and what happens if you move house or change jobs during a trust deed covers the duty it rests on.

It can, by petition rather than by conversion. Your trustee can petition the sheriff under section 2(1)(b)(iv), and a creditor who was never notified or who objected in time has a separate route under section 177.

The trustee’s route

Under section 2(1)(b)(iv) the trustee may petition where you have failed to comply with an obligation under the trust deed, or with a reasonable requirement or instruction, and the trustee avers that sequestration is in the best interests of creditors.

That is a court process, not an administrative one. The trustee has to put the case to a sheriff, who decides.

The trap on the Act’s own contents page

Sections 190 to 192, headed application for conversion to sequestration, were omitted on 31 December 2020 by the Insolvency (EU Exit) (Scotland) (Amendment) Regulations 2019.

They still appear in the Act’s list of sections, so anyone searching for how a trust deed becomes bankruptcy will find them. Any guidance describing conversion under those sections is describing a mechanism repealed more than five years ago.

Sequestration is not a soft landing

It is recorded on the Register of Insolvencies, it reaches a credit file, and a debtor contribution order can run for up to four years. What Minimal Asset Process bankruptcy is covers the shorter route, where someone qualifies for it.

Speak to your trustee before you miss anything. Almost every route on this page stays open while you are engaging, and closes when you stop.

The realistic choices

There is no statutory payment break in a protected trust deed. The relief is an extension of the payment period under section 168(2)(c), with the Accountant in Bankruptcy notified under section 180.

What the escalation looks like if you do nothing

After two consecutive missed contributions, section 174 lets the trustee ask you to instruct your employer to deduct the contribution, and to instruct the employer directly if you do not.

Beyond that comes the sequestration petition and the refusal of discharge. How long a trust deed lasts in Scotland sets out what an extension does to the end date.

Free advice is available at any stage, including after things have gone wrong. Whether to use a free debt charity or a paid debt adviser covers that choice, and our trust deed page sets out how we help.