Trust deeds are still the more common of the two. In 2025-26 the Accountant in Bankruptcy recorded 4,644 protected trust deeds, down 5.6 per cent, against 2,976 bankruptcies awarded, up 19.9 per cent.

Four things decide the choice: how each one starts, how long it runs, what happens to a house, and how discharge works. What sequestration is and what a protected trust deed is cover each on its own.

You grant a trust deed yourself and creditors respond to it. Sequestration can be applied for by you, or petitioned for by a qualified creditor owed at least £5,000.

A trust deed is granted, not negotiated

Creditors do not negotiate the terms. Their role is to accede, to object, or to say nothing, and the Accountant in Bankruptcy’s guidance for trustees describes the deed as a voluntary conveyance of assets for creditors generally.

Nothing has to be agreed. Section 170(2) deems creditors to have acceded unless the trustee receives written objection, within the relevant period, from a majority in number or no fewer than one third in value of them.

Section 193 fixes the relevant period at five weeks beginning with the date the notice under section 169 is registered.

How sequestration starts

A debtor application needs total debts including interest of not less than £3,000, under section 2(8)(a) of the Bankruptcy (Scotland) Act 2016. A qualified creditor is one owed at least £5,000, a figure that has applied since 1 October 2022.

That is the part no trust deed can replicate. You cannot be given a trust deed against your will, and you can be sequestrated against it.

The two figures people mix up

There is a statutory minimum. Section 164(3) of the Bankruptcy (Scotland) Act 2016 requires your total debts, including interest, to be not less than £5,000 at the date you grant the deed.

So the trust deed floor is £5,000 and the debtor application floor is £3,000. They are different tests in different Acts, and neither is a ceiling.

A trust deed has a payment period of 48 months from granting, and discharge has to be applied for. Sequestration usually discharges after 12 months, but a contribution order can run for four years.

The two side by side

Discharge and payments are not the same thing

Being discharged from sequestration after a year does not stop the contribution order, which continues irrespective of discharge. What a debtor contribution order is sets out how it works.

In a trust deed, discharge is not automatic at 48 months either. The trustee applies with a statement that you met your obligations and co-operated, and the date of registration is your date of discharge, which how long a trust deed lasts covers.

When a trust deed discharge can be refused

Since 1 July 2024 a trustee who considers you unreasonably failed to comply must apply to the Accountant in Bankruptcy for agreement to refuse your discharge. If that succeeds, creditors cease to be deemed to have acceded and can enforce again, which what happens if your trust deed fails deals with.

The guidance for trustees is clear that certain things are not proper reasons to refuse, including a change of circumstances that prevents you paying and assets realising less than estimated.

Sequestration has a three-year rule that returns the family home to you if the trustee has not dealt with it. A trust deed has no equivalent, so the trustee’s interest is not time limited.

The three-year rule, and why it does not cross over

Section 112 of the 2016 Act provides that at the end of three years beginning with the date of sequestration the debtor’s interest in the family home ceases to form part of the estate and is reinvested in the debtor.

Section 112 sits outside Part 14. Schedule 4 applies only a short list of provisions to trust deeds, and section 112 is not among them.

What a trust deed offers instead

Both trust deed routes need paperwork before the deed is protected, so raise the house at the first meeting rather than the last. Whether you will lose your home in a trust deed goes through both.

Where an agreement not to sell is properly recorded, the equity figure is frozen while you comply. Break the agreement and the trustee can withdraw from it and sell.

A trust deed has no separate application fee, because the trustee’s fees come out of your contributions. There is no fee at all for a Minimal Asset Process application, and full administration sequestration costs £150.

The fee, and who does not pay it

There is no fee to apply for Minimal Asset Process bankruptcy. The fee that used to apply was removed on 6 February 2023, and the Accountant in Bankruptcy’s own guidance lists no application fee.

The removal was made by regulation 4(3)(c) of SSI 2023/9, which substituted the fee entry in its entirety with a single row covering only a debtor to whom section 2(2) does not apply.

Full administration sequestration carries a £150 application fee, and that is waived for people receiving certain benefits or assessed as having no surplus income.

Citizens Advice Scotland puts the waiver in practical terms. It says the £150 is not payable where the applicant receives universal credit or employment and support allowance.

That waiver matters more than it looks. If your income is low enough that a trust deed contribution would be small, the shorter route may be the cheaper one, and what Minimal Asset Process bankruptcy is is the place to start.

The trust deed side

Section 183(1) is an exhaustive list, and the word it turns on is only. A trustee may be remunerated only by a fixed fee, a percentage of the estate realised, and outlays.

There is no separate bill, and no statutory tariff either. How much a trust deed costs sets out what the trustee may charge and how it is fixed.

Sequestration stops an existing earnings arrestment on the date of sequestration. A trust deed stops one on the date of protection, which is weeks after you sign.

The two triggers, and what creditors keep

Section 72(2) of the Debtors (Scotland) Act 1987 does the work in sequestration, with no application needed. Whether bankruptcy stops a wage arrestment covers it.

Section 173 ends an earnings arrestment on the date of protection, automatically and with no application to any court.

The gap between signing and protection is the exposed period, and whether a trust deed stops a wage arrestment sets out the timing. Deductions taken before either date are credited against the debt rather than refunded.

Less than people fear, but not nothing. A trust deed leaves a non-acceding creditor a sequestration petition, and sequestration leaves a secured creditor its security.

The trust deed petition window

A creditor who was not notified, or who objected within the relevant period, may petition for your sequestration within five weeks of registration of the section 169 notice. Beyond that window they must aver undue prejudice in the distribution or a refusal of your discharge, which the guidance for trustees sets out.

The sheriff awards sequestration only if satisfied it is in creditors’ interests, or that the averments are correct. It is a narrow route rather than an open one.

What discharge does not clear

In sequestration, section 145(3) keeps court fines, penalties, compensation and forfeiture orders and liabilities arising from fraud outside the discharge, and a secured creditor keeps its security.

In a trust deed, section 184(6) has the same effect, and section 185 separately preserves the right to recover a student loan. Neither route clears everything.

Surplus income and property equity decide it more often than the size of the debt. A trust deed needs a contribution you can sustain for four years, and sequestration does not depend on having one.

Where sequestration tends to work better

• Little or no surplus income, so four years of contributions is unrealistic.
• You qualify for the fee exemption on benefits or with no surplus income.
• There is a family home you cannot protect by agreement, and the three-year rule matters to you.

Where a trust deed tends to work better

• You owe at least £5,000 and have steady surplus income after reasonable expenditure.
• You want to keep a house by negotiating an exclusion or an agreement not to sell.
• A creditor is threatening to petition and you want them bound before that happens.

Before you sign either

Be wary of any comparison that presents a trust deed as the way to avoid bankruptcy. Both appear on the same register, and a trust deed that fails can end in sequestration anyway, which what happens if your trust deed fails explains.

Two other routes belong on the table. A trust deed against Minimal Asset Process bankruptcy and a trust deed against the Debt Arrangement Scheme cover them.

Nobody has to pay a firm to work this out, and a free adviser has no interest in the answer. Whether trust deed providers are regulated explains who is accountable for what if you do use one.