Scottish Trust Deed

coolcait

kev1980 wrote: »

Further Update......

Have spoke to KPMG today - Very helpful!

I have been advised that the equity figure agreed at the start of the trust deed does not change, it gets frozen and remains frozen for the entire term of the trust deed.

In England where they have an IVA the value of any property does get the revalued at the end of the IVA - This is where the Scottish Trust Deed is better as the figure of equity is frozen at the outset.

At the end of the trust deed so long as i have co-operated fully and have made all my monthly payments including the equity amount after the 36 months my outstanding debt is written off.

KPMG will only re value the property at the end of the trust deed if I fail to co-operate with them or refuse to make payments etc.... Also please note that not co-operating and not being able to pay should you lose your job are two different things.

All in all this is looking very promising, just hope my flat isn't worth more than i think as I want to keep my equity low for the purposes of the trust deed.

If anyone is thinking of a trust deed i do recommend you speak to KPMG - A very professional company and are fully recommended by CCCS and Payplan.

I'll keep you all up to date with how things go.

Hiya

While this may be the right decision for you, I'm afraid that I cannot endorse your recommendation of KPMG. One of their IPs was trustee in the trust deed which first made me aware of TDs, and contributed to my very negative view of them. I hope that you have a very different experience with them, but I think that other posters need to be aware that not everyone rates KPMG as highly as you do at this stage.

As for fees, which were mentioned by another poster, these can be considerable. It is not unknown for creditors to get paid nothing from a trust deed, as everything which has been paid into it has gone on the trustee's fees. According to the Accountant in Bankruptcy's annual report for 2006-07, one third of trust deeds which ended in that year paid nothing to the creditors. In the case I know about, the amount paid into the trust deed was almost half as much again as the original total debt, but the creditors got a few pence in the pound (literally single figures) each. The person who signed the trust deed feels that they were ripped off, and would have been better to pay the creditors directly.

Whatever else you do, please, please get it in writing that KPMG will not be looking to vary the equity later in the trust deed. I don't see anything in the legislation which states that the equity figure is agreed at the start and is frozen. The Accountant in Bankruptcy's guidance (on their website) does recommend that the equity is realised as early as possible, but goes on to say that in some cases the debtor may agree to delay this to the end of the trust deed to meet an acceptable dividend for creditors or in order to facilitate a remortgage. At the end of the day, the trustee is supposed to administer the trust deed for the benefit of creditors, not for their own benefit, or indeed for yours (no matter how it may have been sold to you).

Before you sign the trust deed, the trustee should - by law - ask you to sign a joint statement which says that you have been made aware that signing a trust deed may:

- lead to bankruptcy
- cause problems with future credit
- mean that your house may be sold, or that you may have to move home
- require payment of contributions
- affect business interests
- affect employment prospects, and
- become public information

Have they discussed with you what would happen if the trust deed doesn't become protected?

kev1980_2

coolcait wrote: »

Hiya

While this may be the right decision for you, I'm afraid that I cannot endorse your recommendation of KPMG. One of their IPs was trustee in the trust deed which first made me aware of TDs, and contributed to my very negative view of them. I hope that you have a very different experience with them, but I think that other posters need to be aware that not everyone rates KPMG as highly as you do at this stage.

As for fees, which were mentioned by another poster, these can be considerable. It is not unknown for creditors to get paid nothing from a trust deed, as everything which has been paid into it has gone on the trustee's fees. According to the Accountant in Bankruptcy's annual report for 2006-07, one third of trust deeds which ended in that year paid nothing to the creditors. In the case I know about, the amount paid into the trust deed was almost half as much again as the original total debt, but the creditors got a few pence in the pound (literally single figures) each. The person who signed the trust deed feels that they were ripped off, and would have been better to pay the creditors directly.

Whatever else you do, please, please get it in writing that KPMG will not be looking to vary the equity later in the trust deed. I don't see anything in the legislation which states that the equity figure is agreed at the start and is frozen. The Accountant in Bankruptcy's guidance (on their website) does recommend that the equity is realised as early as possible, but goes on to say that in some cases the debtor may agree to delay this to the end of the trust deed to meet an acceptable dividend for creditors or in order to facilitate a remortgage. At the end of the day, the trustee is supposed to administer the trust deed for the benefit of creditors, not for their own benefit, or indeed for yours (no matter how it may have been sold to you).

Before you sign the trust deed, the trustee should - by law - ask you to sign a joint statement which says that you have been made aware that signing a trust deed may:

- lead to bankruptcy
- cause problems with future credit
- mean that your house may be sold, or that you may have to move home
- require payment of contributions
- affect business interests
- affect employment prospects, and
- become public information

Have they discussed with you what would happen if the trust deed doesn't become protected?

Hi Coolcait,

Thanks for the info

I've spoken at length on the phone with one of the advisors at KPMG regarding the equity being frozen and remaining frozen at the signing of the trust deed and that the house will not be revalued at the end of the trust deed like an English IVA.

I've been told that it will 100% remain the same throughout the term of the trust deed so long as i continue to make my payments as per the agreed amount on time, and co-operate fully with KPMG.

I understand your concern regarding the fee's and i'm sure your right that there very high and can lead to creditors only getting a few pence per pound back.

As i've not signed anything at the moment i'm not commited and tomorrow the valuation of the house is being done. At this point i will know how much equity KPMG will be looking for at the end of the 36 months I then need to make a decision on whether to go ahead with the trust deed or stay on my DMP with CCCS.

Can I ask what you would recommend in light of my financial situation?

kev1980_2

Just bumping back to the top for any further comments or advice.

Thanks

beanielou

I strongly recommend that you double check the equity situation again.
I know of people who had to raise funds at the end of TD due to rise in equity.
As has been said please get other advice from a money adviser.

kev1980_2

beanielou wrote: »

I strongly recommend that you double check the equity situation again.
I know of people who had to raise funds at the end of TD due to rise in equity.
As has been said please get other advice from a money adviser.

The CCCS want to speak to me on the 02 October for a review of my current DMP.

The surveryor called this morning and done the valuation but wouldn't tell me what the flat is worth so will have to wait until KPMG contact me.

Going to speak with the CCCS on 02 October regarding the Trust Deed. I have confirmed verbally with KPMG that the equity agreed at the beginning of the trust deed will not change at the end so long as i co-operate and make my agreed monthly payments.

The Scottish Trust Deed is different to an IVA as in England where by the equity is looked at the end of the IVA.

LilacPixie

I would certainly hold fire and see what CCCS have to say. At the present time everythig is up in the air with regards to house prices. At the moment Scotland hasn't experiences any great falls but IMO we are not immune and falls will happen. At the end of the three years you will be expected to produce the total of equity in your property that KPMG say you have based on todays valuation. If at the end of the trust deed you home is only worth say 70k and the redemption figure is still 71k where will you get the money from?? Would this mean the trustdeed would fail and you would be made bankrupt and your home sold despite paying ££££ over to KPMG over the previous 36 months??

Out of interest what are KPMG saying you monthly payments will be?? Also how stable is your job baring in mind the current financial uncertainty.

coolcait

Hiya Kev

I can only echo and repeat the advice given - that you get a second opinion from the independent free advice sector: CAB, local authority money advice, National Debtline etc.

I know that Trust Deeds are different from English IVAs - and I know nothing about IVAs . Everything I have said has been based on my knowledge of Scottish Trust Deeds. So, it's not a case that I'm confusing the two.

As far as I can see, there is nothing in the Trust Deed regulations about when equity is looked at/agreed. The Accountant in Bankruptcy's guidance recommends that it is dealt with early in the Trust Deed, but says that it can be done later. I have certainly read of cases where people have been convinced that the equity issue had been dealt with at the beginning of the TD, but were then asked to pay more at the end. And in some cases found that their TD ran on for longer than 3 years.

As people have already said, if you want to go for the TD option, get the assurances about equity in writing - and in plain English. It would do no harm to ask them for a copy of the relevant part of the legislation ;-)

As said before, the legislation does lay down some very specific things that the trustee MUST do before you sign a Trust Deed. These include telling you about alternatives to a Trust Deed - which include a DMP, or the Debt Arrangement Scheme (which is legally binding on creditors, and obliges them to freeze interest, among other things). They also have to make you aware of the potential consequences of signing a Trust Deed (as set out in my earlier post). And they have to give you a copy of the Scottish Government's Debt Advice & Information Package (it's a small leaflet, lol!!).

They have to do this, by law. If they haven't done so, but are giving you assurances on equity - which don't seem to come from the legislation - then you may have to ask them some direct questions about these things.

I would also expect them to discuss with you what would happen if the Trust Deed fails to become protected. A TD is a form of personal insolvency. If it fails to become protected, that is proof of 'apparent insolvency', which can be used by you, or your creditors, as grounds for making you bankrupt.

All of which brings us back to the original recommendations that you get a second opinion from another organisation in the (Scottish) voluntary advice sector.

Good luck!

kev1980_2

Thanks for all the comments and replies.

I spoke with KPMG regarding what would happen should my property fall in value after the 3 years and the agreed amount of equity set at the beginning of trust deed could not be raised.

I was advised that as it was leaglly binding I would still have to come up with the money although the advisor said that he has never known this to happen.

I'm going to speak with the CCCS on 02 October 2008 when i'm getting my DMP review and see what they suggest re the trust deed so will hold off signing anything until then.

I also thought about going down the DAS Debt Arrangement Scheme.. Has anyone signed up to this and how is it going?

Thanks

kev1980_2

further update...

Have spoke with Stirling Council this morning on the telephone and now have an appointment booked to see the money advisor who deals with DAS: Debt Arrangement Scheme on Tuesday 14 October.

This will give me a better choice of options to go down regarding my debt and should I go down the DAS route it will protect my house unlike the Trust Deed scheme.

Keep you all posted

Taygal82

Also, as a word of warning, if you agree the equity figure and then prices do fall, the Trust Deed period is simply extended to cover the equity. For example, you say you have £3k ish equity to pay to the Trust Deed, a lot of IPs get the person to just keep paying beyond their 3 year period so your are in effect in an insolvency procedure for 5 years with all the risks that go with that.
My concern with KPMG's fees were that if they were too high then it could prevent creditors agreeing to your Trust Deed. There is a particular company that acts on behalf of a lot of creditors now and they reject all TDs with a certain amount of fees. I would suggest you go to a smaller IP firm who could do all the things KPMG can do but for less.
I'd like to declare that I have worked in personal insolvency but not since the change in legislation.