Trust Deeds for Council Tax Debt

Can a trust deed stop a council tax wage arrestment?

If council tax arrears have built up and your wages are being arrested, a trust deed is one of the routes in Scotland that can bring the situation under control. This page explains how a trust deed works for council tax debt and a wage arrestment in particular.

Once your trust deed becomes “protected”, the creditors included in it are bound by it and can no longer take legal action to recover those debts. Where your council tax arrears are included, this means the council can no longer pursue separate enforcement such as a wage arrestment for that debt, and a wage arrestment already running for the included council tax debt comes to an end. Your trustee deals with the debt instead.

It is worth understanding the word “protected” here. An ordinary trust deed only binds the creditors who agree to it. It becomes a protected trust deed once enough of your creditors agree, or simply do not object, and it is that protected status that binds every included creditor, including the council, and brings the enforcement to a stop.

Watch: how a council tax wage arrestment works and how a trust deed can stop it.

What is a trust deed?

A trust deed (often called a Protected Trust Deed) is a formal insolvency solution. You make one affordable monthly payment, usually over at least four years, and at the end any remaining debt included in the arrangement that you have not been able to repay is written off. It is set up and managed for you by a licensed insolvency practitioner, who acts as your trustee, and it is overseen by the Accountant in Bankruptcy.

Can I include council tax arrears in a trust deed?

Yes. Council tax arrears are an unsecured debt, and they can be included in a trust deed alongside your other unsecured debts. Once the arrears are part of the arrangement, they are dealt with through your trustee as a single monthly payment, rather than separately by the council.

Debts that can usually be included alongside council tax arrears include:

• Credit cards, store cards and catalogue debts;
• Personal loans and overdrafts;
• Payday and short-term loans;
• Other council tax years and similar unsecured arrears.

Some debts generally cannot be included, such as secured debts like a mortgage, court fines, and student loans. Your current, ongoing council tax also stays outside the trust deed, because it is a live household bill (more on that below).

A trust deed usually applies where you owe £5,000 or more across all your debts. Because council tax arrears on their own are often below that figure, a trust deed tends to be relevant when your council tax debt sits alongside other debts. If council tax is the only thing you owe, a Special Payment Arrangement or the Debt Arrangement Scheme may suit you better.

Which options can stop or remove a council tax wage arrestment?

Only a small number of options can remove a wage arrestment that is already in place. A trust deed is one of them, and the Debt Arrangement Scheme is the other. A Special Payment Arrangement can help you avoid a wage arrestment, and a council may agree to recall one, but that is at the council’s discretion rather than automatic.

Do I still have to pay ongoing council tax?

Yes. A trust deed covers the council tax arrears that have already built up. Your current, ongoing council tax is a live household bill, so you still need to keep paying it as normal to your council. This is an important point to plan for, and it is something a debt adviser will factor into working out what you can afford each month.

How a trust deed works, step by step

• A licensed insolvency practitioner reviews your income, spending and debts, and works out an affordable monthly payment.
• Your debts, including your council tax arrears, are proposed to your creditors in the trust deed.
• If enough creditors agree, or do not object, the trust deed becomes “protected”, which binds all included creditors.
• You make your single monthly payment for the agreed term, usually at least four years.
• At the end, any remaining included debt you have not repaid is written off, and you are discharged from it.

While the trust deed is running, interest and charges on the included debts are effectively frozen, so the amount you owe does not keep growing.

What happens to my home and belongings?

Essential household items, such as ordinary furniture and appliances, are not taken, and a modest car is often kept. If you own your home, any equity in it may need to be taken into account, and you might be asked to release some of that equity or continue payments for longer instead. This will not apply to everyone, and your trustee will explain clearly how it affects your particular situation before anything is agreed.

What does a trust deed cost?

Your trustee is paid a fee for setting up and running the trust deed, but that fee is taken out of the payments you make and any assets realised. In other words, it comes from within your single monthly payment rather than being charged on top, so the amount you pay is based on what you can genuinely afford.

What if my circumstances change?

Life changes, and a trust deed can flex to a degree. If your income goes up or down, you should tell your trustee, who can review your payments. It is important to keep the arrangement on track, because if a trust deed cannot continue it may lead to other action, such as sequestration (bankruptcy). Talking to your trustee early if you are struggling is always the best approach.

Things to weigh up

A trust deed is a significant, formal step, so it helps to see the full picture alongside the benefits:

• A trust deed is recorded on the public Register of Insolvencies, and it stays on your credit file for six years, which can affect your ability to obtain credit during that time.
• It is generally suited to debts of £5,000 or more, so it will not fit every situation.
• If you own your home, the equity in it may need to be taken into account.
• You need to be able to keep up the monthly payments for the full term.

None of this is meant to put you off. It is simply the kind of detail a good debt adviser will walk through with you, so you can make an informed choice and compare a trust deed fairly against the other routes.

Trust deed and council tax at a glance

Is a trust deed the right option for council tax debt?

That depends entirely on your circumstances, including how much you owe, whether you have other debts, and what you can afford each month. A trust deed can be a strong fit where council tax arrears form part of a larger amount of debt and you need to stop money being taken from your wages. For council tax arrears on their own, another route may work better. The best way to find out is to talk it through with someone who understands Scottish council tax debt.

Compare the other options

Where to find free, impartial information

As well as speaking to us, you can read more about trust deeds and your rights from these independent, official sources:

• mygov.scot – Trust deeds (Scottish Government)
• Accountant in Bankruptcy – Protected trust deeds (Scotland’s insolvency service and regulator)
• National Debtline – Trust deeds (Scotland)
• Citizens Advice Scotland – Trust deeds
• MoneyHelper – Dealing with debt (government-backed)

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