Rent Arrears in insolvency

Charco_2

Question:
I was wondering about rent arrears in rent, when i get my TD. Will i go back to paying my usual amount and the arrears included in the TD?

Also do you get left with a surplus amount in a TD. To cover sky for example?

An Answer:

First, question about rent arrears:
I'm not 100% sure about this in Trust Deeds (I work in Insolvency and would be better on IVAs but i do have some experience in Trust Deeds and what i dont know i can always check up BUT) I would imagine - and i'd be quite sure - that for rent arrears you would EITHER
1. Move from one rented accommodation to another where you have no rent arrears and include the rent arrears in your Trust Deed (it is unlikey your landlord will let you stay unless you address the arrears - but he might!) OR
2. Make an allowance in your Income and Expenditure to make up the arrears of your rent and once you've caught up, you would then increase your contribution to the Trust Deed.

So say you pay £500 a month rent (keep it simple) and you have arrears of £1000. You can afford to pay £200 to your Trust Deed and will pay your landlord £600 for 10 months (if he agrees). After these 10 months you will then pay £500 again rent and £300 towards your Trust Deed for the remaining 26 months. (i hope thats a clear example)

I will confirm this over the weekend for you but i'd be surprised if it was much different from this!

Secondly, surplus disposable income:
Your IP will draw up an Income and Expenditure (I&E) with you. The income will include all money that come in to your household (you, your partner, benefits, child tax credits etc) and the expenditure will include various allowable costs you incur every month (rent, heat, light, electricity, food shopping, car costs (HP petrol insurance and tax) a small clothing allowance, medicine?, TV licence...) I would point out that when discussing with your creditors, sky and other such things (Gym, internet...) may be deemed to be a luxury so might not be allowed BUT unlike an IVA you are not expected to pay in the full amount of your Disposable Income... usually you will be allowed to retain a small percentage for yourself for emergencies but it does depend on your circumstances.

Does this help? I'm happy to clarify or answer other questions!

There is one more point to make about Trust Deeds if you currently have a partner. Only one person can enter a trust deed. You can have a Joint IVA in the rest of the UK but if you need a trust deed in Scotland and your Partner needs a Trust Deed, then they are TWO SEPARATE TRUST DEEDS. This also means if the debt is in one partners name then the other partner is not required to contribute to the Trust Deed. So the partner would have their own disposable income to pay for the "luxuries" like Sky...

(They kind of frown upon advice in Private messages on this website so i might also post this answer publicly - i'll leave your name out though so i hope you dont mind!)

mustbedebtfree

Does this work the same when the arrears are due to the Local Authority?

Also if a car is returned to the finance company would the shortfall be included if your notified of the shortfall after the date of TD?

Thanks
MBDF

Charco_2

Yes, it would work the same for the Local Authoruty.

You either make an arrangement to pay (and the cost is allowable in your Income and Expenditure in your Trust Deed) or you move to a property not owned by that landlord and include the arrears as a debt.

As for the car, it depends on when you return it!

If you return it and the shortfall debt is OWED BEFORE you sign a TD then the shortfall debt will be included in the arrangement even if you are certain how much the shortfall is going to be yet. The debt will be estimated and included, and dealt with later when the proof of debt come in.

If you return your car on HP a few months after you have signed your Trust Deed then the debt technically arises after the TD is signed and while the debt can be included in the arrangement, your HP company would be classed as a Non-Acceding Creditor and so would not be technically bound by the Trust Deed. They didn't vote for your TD, or even get the opportunity. They could still then insist on sequestration (bankruptcy).