Scottish Trust Deeds Help and Advice

WardJLittell

Thanks again for your reply.

I am going to see a Local Authority Money Advisor on Tuesday, so everything is frozen until then.

I am confused by the whole Northern Rock thing too. I will wait to see what the advisor says.

Furthermore, I have also been speaking to my parents and in-laws, they know the situation and have intimated that they could give me up to 12k towards paying off the creditors (28%). Do you think this would be acceptable and less painful than DAS or TD?

scottieb

coolcait wrote: »

Hiya again

I've just picked up on this point from your previous post:

"The IP says that the Unsecured NR loan must be included in the TD although they said that NR would be informed that the existing monthly payment will remain the same."

How can that work? If the unsecured loan is included in the TD (as it should be) then you should stop making payments to it. So how can the monthly payment remain the same? That sounds like really odd advice from the would-be trustee.

The thing about a signing a trust deed is that it is a form of personal insolvency. It gets recorded on the Register of Insolvencies - like a sequestration/bankruptcy. It also gets advertised in the Edinburgh Gazette - like sequestration. By law, a trustee is supposed to make you aware of these things BEFORE you sign a trust deed.

If a trust deed fails to become protected, then you can be made bankrupt. Again, by law, you're supposed to be made aware of this BEFORE you get to the signing stage. The law doesn't say that you have to be told WHO could apply for your bankruptcy, but personally I'm not overly impressed by the fact that the trustee didn't let you know that he/she could do it.

There's no guarantee that any of your creditors would apply for your bankruptcy even if the trust deed failed. If they take the view that they're more likely to get money out of you by harassing you on the phone, or by letter, then they might just stick to doing that.

If there's so little equity in your house, I do have to wonder what advantages a trust deed has over bankruptcy for you. A trust deed will last for three years - although they can last longer if the trustee chooses not to discharge you. You would be expected to make a monthly payment throughout that time.

You would be discharged from bankruptcy after one year, though you would have to pay a contribution/Income Payment Agreement for three years, if that's what you had agreed.

If family/friends are willing to pay the trustee in a trust deed to buy out the equity in your property, then wouldn't they do the same thing if you were actually bankrupt?

I'm glad you are thinking about going for independent advice, because that will give you the chance to run through these points.

All that said, if you own a house, you might not actually be in a position to apply for your own bankruptcy - unless you've already received a Charge for Payment or Statutory Demand from a creditor?

Ironically, if you sign a trust deed, and it doesn't become protected, you could use that to show that you are 'apparently insolvent', and apply for your own bankruptcy.

All of that is before you even start considering DAS!

I know it's a really tough time for you, and there probably seem to be too many options and ifs and buts and maybes. And I really do feel that a chat with someone neutral could help you a lot.

Good luck!

Coolcait/WardJLittell,

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Before I make any comment, I will declare that I work for an Insolvency Practioner and some may therefore assume I have a vested interest in any discussion along these lines. To allay these concerns, I will not therefore comment upon who I work for, nor will I recommend one insolvency practioner over another. I trust therefore that my comments can be taken in the constructive manner in which they are intended and will not in any shape or form be construed to be attempting to influence anyone to move in the direction of insolvency if there are other more viable options available.
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Disclaimer over, let me make some constructive comments which I hope will be helpful for the original poster.

OP mentioned that the house is jointly owned, and other than the Northern Rock debt, partner is debt free. Presume partner not looking at any debt management/relief options. Partner will still be liable for the Northern Rock unsecured debt, so presume that is why the Trustee assumes that the monthly Northern Rock payment will remain the same - ie partner will continue to pay it. WardJLittell - is this a fair assessment?

As for not seeing the benefit of trust deed over bankruptcy, coolcait, I think you're running the risk of implying that bankruptcy is a better position for the OP than a trust deed. This is an unfair generalisation and extremely rarely correct.

You have correctly pointed out that with no apparent insolvency bankruptcy may not even be an option at present and there is good reason for that - bankruptcy is designed as a last resort, if other options are still available, bankruptcy should be avoided if possible. Despite that, it is a valid option providing protection from creditors should a trust deed fail to become protected, but if ever there was a possibilty of a trust deed becoming protected, I would head in that direction every time before jumping straight into bankruptcy.

There are a large number of advantages of trust deed over sequestration. Most importantly the long term consequences of trust deed are far less reaching than a trust deed. Bankruptcy is rarely an outcome in a protected trust deed (contrary to a comment earlier in this thread, the trustee would only consider sequestration if it were likely to be in the best interests of the creditors in general - i.e. will the creditors get a better return in a bankruptcy than they would in a trust deed? This is rarely the case unless there are legal issues such as existing inhibition over property when there is equity to be realised, or the debtor is completey refusing to co-operate in any way.)

A trust deed is also generally far more flexible than a bankruptcy. You mention income payment agreements (IPAs) in bankruptcy, but more powerful than that are income payment orders (IPOs) which can be enforced if debtor does not make their contributions as agreed in IPA. There is no such enforcement action in a trust deed.

I do strongly echo the advice that coolcait is giving with regard to seeking independent advice. CABx and local authorities provide a tremendous (free!) service, however unfortunately the quality and consistency of advice can vary to a large degree. As well as your forthcoming local authority money adviser appointment, I would take the chance to speak to one of the national non fee charging agencies (Martin Lewis is a strong advocate of CCCS (0800 138 3328) and National Debtline (0808 808 4000). CCCS have advisers who are based in Scotland whilst the National Debtline I believe is all based in Birmingham so I think CCCS tend to have a better grasp of Scottish issues.)

I hope the above is helpful. I do get rather distraught at times watching misinformation (granted in virtually all cases it is not deliberate, but rather through a lack of understanding of what is admittedly complex legislation) regarding trust deeds and bankruptcy being posted on forums. I have for the last year or so been lurking on this forum without ever speaking out. I have decided that I am happy to become a sounding board for people with personal insolvency queries and I undertake to do so from a personal perspective rather than a professional one. At all times I will remain impartial and, I hope, nothing but constructive.

In summary, OP, yes, Northern Rock have had a habit of objecting to trust deeds in the past and yes, on some occasions (not all!) they are still likely to object. However, I am inclined to agree with your proposed trustee that as long as your partner is prepared to carry on paying the unsecured element of the together mortgage, there is a strong possiblity that NR will not object.

I echo coolcait's sentiment that it is generally unlikely that a creditor will apply for your bankruptcy should a trust deed not become protected. In the vast majority of cases, creditors receive less money at the end of a bankruptcy than they do in a trust deed, hence they are not keen on this option in the majority of cases. If you have a huge amount of equity it could be the exception to this rule, however based on your figures above, it does not look as though this is the case.

scottieb

WardJLittell wrote: »

Thanks again for your reply.

I am going to see a Local Authority Money Advisor on Tuesday, so everything is frozen until then.

I am confused by the whole Northern Rock thing too. I will wait to see what the advisor says.

Furthermore, I have also been speaking to my parents and in-laws, they know the situation and have intimated that they could give me up to 12k towards paying off the creditors (28%). Do you think this would be acceptable and less painful than DAS or TD?

Best people to ask about likely levels of full and final settlement are definitely the free money advisers, as they are likely to be the ones most commonly doing it. From my experience 28% is extremely unlikely to be successful. Historically you would usually be looking at 80% plus, but it has been some time since my days in the free advice sector (i was a debt adviser in CAB for three years from 2002 to 2005) and it may be that the current climate has seen creditors accepting smaller full and final offers.

If you could raise this sum and the creditors accepted it, go for it and rip up the trust deed you have sitting in front of you!

One word of caution, if approaching creditors to offer a full and final settlement, make sure you get acceptance in writing before raising and distributing the funds. Last thing you want to do is raise all those funds from famliy and then still have the creditors looking for more!

WardJLittell

scottieb - as with Coolcait , your advice is very much appreciated and valued. It also gives me a new perspective.

The long and short of it is that the NR mortgage/unsecured will continue to be paid as normal and with this in mind we don't want to jeopordise our home with the unsecured debt.

The IP believes there is a chance thet NR will not object and if that happened - brilliant. But, if the TD fails to be protected, then that's what we are unsure about.

In an email, I asked the IP what would happen if it fails and he said they would prepare for sequestration. I asked what if I do not want sequestration what would he do? He replied that how would I expect to get out of debt as a DAS would take too long. But he still did not say what he would do.

In my mind, seq equals losing this house.

So i cannot take the risk. If the TD failed and returned to the status quo then yes I would give it a go but as coolcait says - What happens if it fails and the IP goes for Seq against my wishes?

I will see what the money advisor says. This is bloody tough going.

Thanks again.

WardJLittell

Re Full and Final settlement:

Forgot to say that last year HFC and MBNA were prepared to accept 60% and 50% respectively. HFC still have the debt while MBNA debt is now with Equidebt.

scottieb

WardJLittell wrote: »

In my mind, seq equals losing this house.

There is a common myth which says that sequestration = losing house. If you guys are able to deal with the equity in a trust deed then there is nothing different from that perspective in the sequestration. If negative equity then Accountant in Bankruptcy guidelines are the same for both trust deed and sequestration - £500 payment from a third party to buy out the trustees interest in the property. From your posts above, sounds like between 0 and 5k equity. If this is manageable from a third party in a trust deed, then it would simply be the same case in the sequestration.

I am a little confused that you don't know the exact equity figure just now if you have the trust deed in front of you to sign. All trustees should be confirming the equity position before you sign a trust deed, as otherwise you don't know what the implications are for you, likewise the trustee cannot give a clear representation of the position to your creditors either. Only way you can know the equity position is if a survey has been done and you have redemption figures for your mortgage and any secured loans. If this has not been done it's a reason to back away. I'm not saying a trust deed is not necessarily the best option for you, but it may be worth looking at a different company to do it. Stick to the well recognised names for IPs and take the advice of the impartial staff at CCCS and National Debtline rather than paying too much attention to radio, television and newspaper adverts which promise to "wipe out your debt" without going into much more detail.

WardJLittell

scottieb - thanks for your reply.

the trust deed says the greater of £500 or equity pending a valuation.

I would like to know the value before I sign but I don't if that's an option.

scottieb

Ok, now I am worried for you. In my opinion, any IP who does not have a valuation in place before you sign a trust deed is sailing very close to the wind. I think I would be steering clear of this particular IP and using the services of someone else.

The Protected Trust Deeds (Scotland) Regulations 2008 say that the trustee must provide to the creditors a statement that they will provide upon request "any valuation held by the trustee which has been made by a third party and which relates to an asset of the debtor". The trustee also need to provide within the statement of affairs, "a list of the debtor’s assets and liabilities".

I do not see how a meaningful list of assets can be provided without the corresponding value of those assets. Without a valuation, this list of assets is pretty meaningless.

Finally, the trustee should be providing an estimated dividend to the creditors (i.e. how much are they likely to get back again at the end). If the level of equity is not known at the start, how can they provide a meaningful projection for the dividend at the end? Simple answer, they can't.

Now, whilst a trustee who allows someone to sign a trust deed before a property valuation has taken place is not explicity breaking the regulations, they are certainly not following best practice.

From your point of view, you should know the position with your property before you sign anything. If the equity is small (or possibly even negative) then at least you know the position is manageable given that you have already mentioned that third party funds of a few thousand could be possible for you.

Yes, you can (and should!) insist on knowing the equity position before you sign anything.

Out of curiosity, if you have not have any advice other than from the IP, how do you get their details in the first place? Was it an advert on radio/tv/newspaper? Let me repeat my earlier advice, speak to one of the national non fee charging agencies. Martin Lewis regularly praises CCCS and National Debtline and I echo that sentiment. Another national non fee charger is Payplan and they seem to be pretty clued up with regard to Scottish legislation too. You can try them on 0800 917 7823.

Hope the above helps!

WardJLittell

I was given the IP's details from a friend who went through a TD in 98. Although my friend didn't have any property so things were pretty straight forward for him.

As I say, Money Advisor on Tuesday and I will contact CCCS on Monday morning.

coolcait

scottieb wrote: »

Ok, now I am worried for you. In my opinion, any IP who does not have a valuation in place before you sign a trust deed is sailing very close to the wind. I think I would be steering clear of this particular IP and using the services of someone else.

The Protected Trust Deeds (Scotland) Regulations 2008 say that the trustee must provide to the creditors a statement that they will provide upon request "any valuation held by the trustee which has been made by a third party and which relates to an asset of the debtor". The trustee also need to provide within the statement of affairs, "a list of the debtor’s assets and liabilities".

I do not see how a meaningful list of assets can be provided without the corresponding value of those assets. Without a valuation, this list of assets is pretty meaningless.

Finally, the trustee should be providing an estimated dividend to the creditors (i.e. how much are they likely to get back again at the end). If the level of equity is not known at the start, how can they provide a meaningful projection for the dividend at the end? Simple answer, they can't.

Now, whilst a trustee who allows someone to sign a trust deed before a property valuation has taken place is not explicity breaking the regulations, they are certainly not following best practice.

From your point of view, you should know the position with your property before you sign anything. If the equity is small (or possibly even negative) then at least you know the position is manageable given that you have already mentioned that third party funds of a few thousand could be possible for you.

Yes, you can (and should!) insist on knowing the equity position before you sign anything.

Out of curiosity, if you have not have any advice other than from the IP, how do you get their details in the first place? Was it an advert on radio/tv/newspaper? Let me repeat my earlier advice, speak to one of the national non fee charging agencies. Martin Lewis regularly praises CCCS and National Debtline and I echo that sentiment. Another national non fee charger is Payplan and they seem to be pretty clued up with regard to Scottish legislation too. You can try them on 0800 917 7823.

Hope the above helps!

I'm in wholehearted agreement with this! :T

I wasn't in wholehearted agreement with your earlier post, and I certainly didn't agree with the interpretation you'd put on my words . However, I'm tempted to let that go now, in the light of the above

WlJ, putting together everything you've been telling us, I do think there are grounds to worry about the info you've been given (and haven't been given). I'm starting to wonder (note the formulation - I'm sharing my thoughts only ) if your IP is even taking into account the new regulations which came into force last April . He certainly seems to be missing out a few of the things which the legislation now requires him to do.

I'm glad you have an appointment with a money adviser for next week, and that you're going to call CCCS. I wouldn't rule out National Debtline either -given that the Scottish Government has provided £382,000 to back the current debt awareness campaign, which highlights the national debtline number - they might well have worked on their knowledge of the Scottish system. It gives you another opinion to go on too.

Good luck!