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How much does a Trust Deed cost?
n Your Trustee’s fee and costs are met
from the funds received into the Trust
Deed, there are no payments due by you
over and above the agreed contribution
from your income and/or assets
n Creditors agree the level of the Trustee’s
fee at the beginning of the Trust Deed
and monitor that level throughout
n There is no cost to you if you decide
against signing a Trust Deed after having
a meeting with one of our advisers
n To find out more information on our
fees please visit one of our websites
detailed below
Advantages of a Trust Deed
Once protected, your creditors cannot take
legal action against you for recovery of any
debt outstanding as at the date the Trust
Deed was signed.
You no longer have to deal with your
creditors – your Trustee will do this for you,
taking away the pressures of the constant
phone calls and distressing mail.
Interest and charges are frozen – your
creditors can only claim for the outstanding
balance due to them as at the date the Trust
Deed was signed.
You only have to make one affordable
monthly payment, calculated after an
allowance has been made for all of your
general living expenses and household bills.
You will normally make payments for
a period of between three and five
years - after the agreed period you will
be discharged from the Trust Deed. All
remaining debts will be written off apart
form those specifically excluded, such as
students loans.
If you are in financial difficulty, a Trust Deed
can be signed immediately.
A Trust Deed does not involve court
proceedings.
Disadvantages of a Trust Deed
Creditors may object to the Trust Deed
proposal in sufficient number or value,
causing it to fail to achieve protected status,
as a result, sequestration (bankruptcy)
becomes an alternative solution.
A Protected Trust Deed does not stop
existing diligence e.g. an existing earnings
arrestment would still be effective.
Your credit rating may be adversely
affected.
A Protected Trust Deed does not stop
existing diligence e.g. an existing earnings
arrestment would still be effective.
Creditors may object to the Trust Deed
proposal in sufficient number or value,
causing it to fail to achieve protected status,
as a result, sequestration (bankruptcy)
becomes an alternative solution.
Will I lose my home?
If you are a home owner, the level of
equity (difference between the value of
your house and any loans secured on it) is
calculated at the start of the Trust Deed
n The equity has to be realised for the
benefit of your creditors but this can
normally be done without having to sell
your home
Equity can be realised by the following
methods:
- 3rd party payments
- Extending the period of the
Trust Deed
- Re-mortgage or secured loan
- Sale by private bargain or open
market
Ca n I keep my car?
If your car is valued at less than £3,000
then it will not be considered an asset in
your Trust Deed
In almost all cases you will be able to
keep your car, especially if it is required
for work purposesnew and/or worth a
significant amount then you may have
to trade it in for a less expensive car
If the car is subject to a Hire Purchase
agreement or another type of secured
finance agreement, you will be allowed
the contractual repayment within your
monthly expenditure and, in most cases,
you will be able to keep the car
Will I lose my endowment or life assurancepolicy?
If you have an endowment policy that is
not assigned to your mortgage lender
then it may have to be cashed in for
the benefit of creditors. Alternatively, a
third party can pay the equivalent of the
policy’s surrender value to your Trustee,
therefore, allowing you to keep the policy
Your Trustee will note his interest in your
life assurance policy; you will be able to
keep your policy as long as you maintain
the monthly premium
Typical Examples
Scenario 1
Married couple with two children of school age, Mr and Mrs in full time employment,
Mr earns £2,000/m, Mrs earns £1,200/m
Mr has debts of £40K, Mrs has debts of £25K, £20K of the debts are joint, total
repayments are £1,050/m
Home is jointly owned with £5,000 of equity
Jointly owned Term Life Assurance policy
Motor vehicle on HP, Mr is registered owner
Debts were incurred for home improvements and then to supplement the household
income when Mrs took time off work to look after their children before they started
school, a large consolidation loan was obtained in an effort to reduce their monthly
outgoings but they continued to utilise other credit and their level of debt spiralled
out of control. They then sought financial advice
Solution
Both Mr and Mrs signed Trust Deeds, Mr pays £300/m, Mrs pays £200/m for a 3 year
period, Mrs’ parents are paying 20 monthly payments of £250 to acquire the Trustee’s
interest in the property - £2,500 to each Trust Deed, premium for life assurance policy is
an allowable expense. Mr has also been allowed the HP payment as an expense and the
HP company are willing to allow the agreement to continue. At the end of the Trust Deed,
creditors will receive a payment of 18p in the £ from Mr and a payment of 14p in the £ from
Mrs, all remaining debts will be written off.
Scenario 2
Divorced male, self employed tradesman, one dependent who lives with his ex-wife
and for whom he has visitation rights, earns gross £1,800/month
Debts of £60,000, including £20K shortfall due to mortgage lender from repossessed
family home and self assessment tax of £8K
Now lives in rented accommodation, family home was solely owned
Unassigned endowment policy with a surrender value of £4,800
Works van, owned outright, poor condition, high mileage
Debts were incurred in previous marriage to maintain his family’s standard of living,
ex-wife was unemployed, loans and credit cards were used to supplement his income,
marital breakdown followed and the family home was repossessed, he struggled
to maintain his repayments but his income was insufficient to pay his daily living
expenses, child maintenance, household bills and his creditors. He then sought
financial advice
Solution
He signed a Trust Deed, paying £150/m for a 4 year period, the endowment policy will be
surrendered and the funds held for the benefit of creditors. The van will be kept as it is
required for work purposes, an allowance has been made for child maintenance payments,
self assessment tax and NI contributions (he must pay his ongoing tax liabilities). The
property shortfall will be treated in the same way as all other debts. At the end of the
Trust Deed, all creditors will receive a payment of 10p in the £, all remaining debts will
be written off.
Published in
News
Sequestration is the Scottish legal term for
Bankruptcy.
Sequestration is an option if you are unable to
pay your debts as they fall due and can allow
for up to 100% of your debts to be written off.
A Trustee would take control of your assets
and assess whether you would need to pay
an income contribution towards your
insolvent estate.
It is an alternative to other forms of debt
relief such as the Debt Arrangement Scheme
(DAS) or a Protected Trust Deed.
How does Sequestrati on work?
You will meet with one of our experienced
advisers who will explain the options available
to you. If you decide sequestration is the best
option, you would complete an application
to the Accountant in Bankruptcy applying for
your sequestration. Once your sequestration
has been awarded you are protected from any
creditors taking legal action against you.
Your Trustee’s main duty in the sequestration
is to take control of your assets and if
required, realise them for the benefit of your
creditors. Your Trustee will also review your
Income and Expenditure and assess whether
you can afford to make a monthly income
contribution to your Sequestration. Both
duties are very similar to the responsibilities
assumed by a Trustee under a Trust Deed.
You are automatically discharged from your
Sequestration after 1 year, however, if you can
afford an income contribution then you will be
required to make a monthly payment to your
sequestration for 3 years.
How much will the Sequestration on cost?
n You must pay an application fee of £100
to the Accountant in Bankruptcy when
applying for your sequestration
n The Trustee’s fees and costs are then
met from the funds received into the
Sequestration through the realisation
of assets and the monthly contribution;
there are no payments due by you over
and above the agreed contributions from
your income and/or your assets
n To find out more information on our fees
please visit one of our websites
detailed below
Advantages of Sequestration
You will be automatically discharged from
your sequestration after 1 year (assuming
your Trustee does not have cause to delay
the discharge).
Your application does not involve Court
proceedings.
Stops existing diligence e.g an earnings
arrestment.
If you are asked to pay a contribution, then
it will be an affordable monthly payment
that is calculated after an allowance has
been made for all your general living
expenses and household bills.
Interest and Charges are frozen – your
creditors can only claim for the outstanding
balance due as at the date of sequestration.
You no longer have to deal with your
creditors – your Trustee will do this for you,
taking away the pressure of the constant
phone calls and distressing mail.
Once sequestrated, creditors cannot take
legal action to recover their debt.
Creditors do not have an opportunity to
reject the Sequestration.
100% debt relief is possible.
Disadvantages of Sequestration
Assets of a significant value may be sold for
the benefit of creditors.
Unable to act as a director of a Limited
Company.
It may harm your employment prospects
both now and in the future.
Student Loans are not discharged by
Sequestration.
Adverse effect on credit rating.
£100 application fee to be paid to the
Accountant in Bankruptcy.
Will I lose my home?
n If you are a home owner, the level of
equity (difference between the value of
your house and any loans secured on
it) is calculated and the Trustee will be
required to realise that amount for the
benefit of creditors
n The equity can be realised in most cases
without having to sell your home – it is
extremely unusual to sell your home,
unless you want to do so
n Equity can be realised by the following
methods
- 3rd party payments e.g. family,
friend, business associate etc
- Extending the payment period
- Re-mortgage or secured loan
- Mortgage to Rent scheme
- Sale by private bargain or open
market
Can I keep my car?
n If your car is valued at less than £3000
then it will not be considered an asset in
your sequestration
n In almost all cases you will be able to
keep your car, especially if it is required
for work purposes
n If the car is brand new and/or worth a
significant amount then you may have
to trade it in for a less expensive car,
releasing either income or a lump sum to
the Sequestration
n If the car is subject to a Hire Purchase
agreement or another type of secured
finance agreement, you will be allowed
the contractual repayment within your
monthly expenditure (provided it is not
excessive) and, in most cases, you will
be able to keep the car
Sequestration is the Scottish legal term for
Bankruptcy.
Sequestration is an option if you are unable to
pay your debts as they fall due and can allow
for up to 100% of your debts to be written off.
A Trustee would take control of your assets
and assess whether you would need to pay
an income contribution towards your
insolvent estate.
It is an alternative to other forms of debt
relief such as the Debt Arrangement Scheme
(DAS) or a Protected Trust Deed.
How does Sequestrati on work?
You will meet with one of our experienced
advisers who will explain the options available
to you. If you decide sequestration is the best
option, you would complete an application
to the Accountant in Bankruptcy applying for
your sequestration. Once your sequestration
has been awarded you are protected from any
creditors taking legal action against you.
Your Trustee’s main duty in the sequestration
is to take control of your assets and if
required, realise them for the benefit of your
creditors. Your Trustee will also review your
Income and Expenditure and assess whether
you can afford to make a monthly income
contribution to your Sequestration. Both
duties are very similar to the responsibilities
assumed by a Trustee under a Trust Deed.
You are automatically discharged from your
Sequestration after 1 year, however, if you can
afford an income contribution then you will be
required to make a monthly payment to your
sequestration for 3 years.
How much will the Sequestration on cost?
n You must pay an application fee of £100
to the Accountant in Bankruptcy when
applying for your sequestration
n The Trustee’s fees and costs are then
met from the funds received into the
Sequestration through the realisation
of assets and the monthly contribution;
there are no payments due by you over
and above the agreed contributions from
your income and/or your assets
n To find out more information on our fees
please visit one of our websites
detailed below
Advantages of Sequestration
You will be automatically discharged from
your sequestration after 1 year (assuming
your Trustee does not have cause to delay
the discharge).
Your application does not involve Court
proceedings.
Stops existing diligence e.g an earnings
arrestment.
If you are asked to pay a contribution, then
it will be an affordable monthly payment
that is calculated after an allowance has
been made for all your general living
expenses and household bills.
Interest and Charges are frozen – your
creditors can only claim for the outstanding
balance due as at the date of sequestration.
You no longer have to deal with your
creditors – your Trustee will do this for you,
taking away the pressure of the constant
phone calls and distressing mail.
Once sequestrated, creditors cannot take
legal action to recover their debt.
Creditors do not have an opportunity to
reject the Sequestration.
100% debt relief is possible.
Disadvantages of Sequestration
Assets of a significant value may be sold for
the benefit of creditors.
Unable to act as a director of a Limited
Company.
It may harm your employment prospects
both now and in the future.
Student Loans are not discharged by
Sequestration.
Adverse effect on credit rating.
£100 application fee to be paid to the
Accountant in Bankruptcy.
Will I lose my home?
n If you are a home owner, the level of
equity (difference between the value of
your house and any loans secured on
it) is calculated and the Trustee will be
required to realise that amount for the
benefit of creditors
n The equity can be realised in most cases
without having to sell your home – it is
extremely unusual to sell your home,
unless you want to do so
n Equity can be realised by the following
methods
- 3rd party payments e.g. family,
friend, business associate etc
- Extending the payment period
- Re-mortgage or secured loan
- Mortgage to Rent scheme
- Sale by private bargain or open
market
Can I keep my car?
n If your car is valued at less than £3000
then it will not be considered an asset in
your sequestration
n In almost all cases you will be able to
keep your car, especially if it is required
for work purposes
n If the car is brand new and/or worth a
significant amount then you may have
to trade it in for a less expensive car,
releasing either income or a lump sum to
the Sequestration
n If the car is subject to a Hire Purchase
agreement or another type of secured
finance agreement, you will be allowed
the contractual repayment within your
monthly expenditure (provided it is not
excessive) and, in most cases, you will
be able to keep the car
Sequestration case studies
Scenario 1
Divorced Male who works in retail, earning a wage of £1,500 per month
Debts of £65,000 which consist of a £40,000 shortfall from the sale of his
repossessed marital home and a £12,000 personal loan for a car which he sold last
year and various credit card debts. The funds received for the car were used to pay off
other debt. His ex wife jointly owned the property but she has already applied for her
sequestration
He now lives in a property which he rents from the council
He has no assets
When the debtor divorced, he could not maintain the payment to the mortgage and the
secured lender repossessed their home. With the added burden of the shortfall for the
mortgage along with his existing debt, he eventually sought financial advice
Solution
He has disposable income of £160 per month after living expenses and household bills are
deducted. He has applied for his sequestration rather than sign a Trust Deed. The Trust
Deed would not be suitable because he is unable to offer creditors a dividend of at least
10p in the £. He would be required to pay a contribution of £160 for 3 years; however, he
would be discharged from his sequestration after 12 months. The creditors may receive a
small dividend at the end of the 3 years, with the rest of the debt legally written off.
Scenario 2
Married couple with a 3 year old child, Mrs unemployed since stopping work to have
her child and Mr in full time employment. Mr earns £2,100 per month
There are joint debts of £22,000 and Mr also has additional debts of £43k
Home is jointly owned with negative equity of £18,000
Motor vehicle is owned outright by Mr, and is valued at £2,900
Debts were incurred, initially, to enhance their standard of living. Mr also had his own
sole trader business however due to a downturn in trade, the business ceased to trade
last year, and he went into full time paid employment. Unfortunately, he received a
large tax bill of £10,000 and was also liable for the £15,000 overdraft for his business
account. They struggled to maintain the payments and Mr used credit cards to try and
service his debt
Solution
Mr and Mrs both applied for their bankruptcy. Mr has a surplus income of £155 after
all their living costs were deducted from his income. As Mrs does not work, she has no
disposable income so will not pay anything in her sequestration and there will be no return
to creditors. There is considerable negative equity in the property, as such, a third party
would need to pay a nominal sum of £500 in each case to release the Trustee’s interest
in the property. Both will be discharged from their sequestration after 1 year, however, Mr
would continue to pay his contribution for a further 2 years. The creditors may receive a
small dividend at the end of 3 years in Mr Sequestration, with the rest of the debt legally
written off.
Published in
News
The Debt Arrangement Scheme (DAS) is a
Scottish Government-run debt management
tool which allows you to repay your debts in
full over time while giving you protection from
any creditors taking legal action against you.
It is only available to Scottish residents
and once approved, all creditors must by
law freeze any further interest and charges
on the debts, and ultimately must waive
these altogether if you fully complete the
programme.
It is an alternative to other forms of debt
relief such as a Trust Deed or Sequestration
(Bankruptcy).
How does DAS work?
You will meet with one of our experienced
advisers who will explain the options available
to you. If you choose DAS, you commit to a
debt payment programme (DPP) based on all
of your creditors receiving regular payments
of their share of whatever you can reasonably
afford each month. A DPP can last for any
reasonable length of time, depending on the
amount of debt and how much you can pay.
Proposals are sent to all of your creditors and
they have 21 days to respond if they wish to
object to them. If no creditors object then the
DPP is approved automatically. If one or more
creditors do object then the DPP can still
become approved if it is judged to be
“fair and reasonable” by the DAS
Administrator (Scottish Government Agency
that oversees DAS). Of course, it is possible that your
circumstances may change whilst you are
repaying your debts under DAS, in which case
the DPP may be varied to accommodate this
change without penalty.
How much does a DAS cost?
n It is possible to make a DAS application
for free via a local CAB or local council
money advice centre – if you have a DAS
adviser within 10km of your home then
you will be advised that a free service
may be available
If you apply for a DAS DPP with RSM
Tenon, you will pay an ‘advice &
setup fee’ and an ongoing ‘monthly
management fee’ to cover the work
required for the duration of the DPP
n To find out more information on our
fees please visit one of our websites
detailed below
What are the advantage of a DAS
It is legally binding on your creditors and
is supervised by the Scottish Government
(unlike an informal Debt Management Plan
which creditors can choose to end at any
time).
Your creditors are forbidden from taking
any further action against you to recover
the debts owed to them.
DAS freezes all interest and charges on your
debt from the date your DPP is approved
and this is written off when the DPP is
completed.
You make one affordable regular payment
which is distributed between all of your
creditors for you on a monthly basis.
Any arrestment on your wages that is
already in place is stopped.
Any assets you own are unaffected,
including your home, even if there is
significant equity in it.
Creditors that do not accept the proposals
can be forced to comply with the
arrangement if it is judged to be “fair and
reasonable”.
It is possible to set up a joint DPP as long as
at least one debt is in joint names with the
other applicant
.
It is possible to set up a single debt DPP.
What are the disadvantages of a DAS
If you do not comply with the conditions of
the DPP then it may be revoked. Creditors
are then free to pursue legal action and to
add on interest and charges if they wish.
Your credit rating may be adversely
affected
There is no debt write off, only relief from
further interest and charges, therefore
a DAS may take considerably longer to
complete than an insolvency option such as
a Protected Trust Deed or Sequestration.
DAS case studies
Scenario 1
n Married Couple, with 2 young children. Mr Y is in full time employment and Mrs Y cares
for the children at home
n Mr Y has credit card debts totalling £7k, Mrs Y has debts of £4k and there are £5k of
joint council tax arrears (ie total debts £16k)
n They had been paying minimum payments on their debts, totalling around £300 per
month, which was just affordable but due to high interest rates the outstanding
balances were reducing very slowly indeed. However, Mr Y’s wages were then arrested
for non-payment of council tax, to the tune of £200 per month. As a result of this they
could afford only £100 per month for all of their other debts
Solution
Mr & Mrs Y set up a joint DAS. As the earnings arrestment is lifted upon approval, they are
able to afford £300pm. All further interest and charges are frozen and their debts will be
repaid in full within 5 years (including fees).
Scenario 2
n Mr X is a single man in full-time employment. Owns home worth £140k, with
outstanding mortgage £80k
n Owns car worth around £7k. Did not wish to lose car or have to sell home as has
elderly parent living nearby, who requires help getting around
n Had unsecured debts totalling £25000 due to previous business failure. He could
afford to pay £350 pm to his unsecured debts and attempted to set up a payment
arrangement with his creditors on this basis through a Debt Management Company
n Unfortunately one former supplier is owed £8k and is not willing to agree to any
payment proposals, insisting Mr X must pay the full debt or face legal action. The
creditor is aware of the equity in the house and Mr X fears that this creditor may
eventually seek to have him made bankrupt and force a sale of his home
n Mr X has tried to remortgage to release funds but was rejected
Solution
Mr X set up a DAS, paying £350pm. This means his debts will be fully repaid within 80
months (including fees) and his home and car will remain unaffected.
The difficult creditor objected to the proposals, but they were deemed “fair and reasonable”
by the DAS administrator. This meant that the creditor was forced to accept the
arrangement and is no longer able to take any enforcement action as long as Mr X sticks
to his DPP.
Published in
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Should I make myself bankrupt?
Published in
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Tagged under
Bankrupt landlord
Published in
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Tagged under
How to get out of debt
Published in
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Tagged under
What it costs to be in debt.
Published in
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Tagged under
I have a few credit cards and loans I am struggling with a two CCJ's which I cannot afford to pay what they are asking for. Can I include these in a debt management plan?
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Jason's Story
Jason called us when his his £24,500 debt became unmanageable. He was debt free in just 60 months!
- Gave him ONE affordable
monthly repayment - Wrote off £9500 of his debt total?
- We protected his home
and assets?
Top 10 ways we can help you!
Reduced Stress- No creditor contact with an IVA
- Write off debt you can’t afford to repay with an IVA
- Freeze interest and charges in an IVA
- One affordable monthly payment
- Fresh Start
- Debt free in 60 months with an IVA
- Stop repossession
- Instant, confidential advice
- Trained advisors offering advice on a range of solutions
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