Trust Deed FAQs
Questions:
Answers:
- How do I contact Baines & Ernst about Protected Trust Deeds or Sequestration?
To contact us, simply call on 0800 294 6310 or fill in the 30 second debt test. Or you can request more information about trust deeds and sequestration online.
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- Why will my creditors agree to a Protected Trust Deed?
Usually your creditors wish to help and simply want to recover as much of your debt as possible. Additionally, they know that sequestration is costly, time consuming, and a large amount of the money will be used to cover the Insolvency Practitioner’s professional fees. However there is no guarantee that your creditors will accept the PTD as each case will be considered against your personal circumstances and is subject to creditor approval.
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- Is a Protected Trust Deed the same as sequestration?
Although it is still governed by the court and a legal process for unmanageable debts, a Protected Trust Deed is a less formal process than sequestration.
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A Trust Deed is a legally binding agreement between you and your creditors in which you agree to make a regular contribution from your income and to release certain assets to your trustee (the Insolvency Practitioner). As this is a legally binding document you may wish to take independent legal advice. Under legislation, if your creditors do not object to the Trust Deed it will become protected and therefore binding on all your unsecured creditors. Your trustee will then negotiate with your creditors on your behalf and pays them a proportion of the amount owed to them. It is real alternative to Sequestration (Bankruptcy) and normally lasts for three years. At the end of a Trust Deed the balance of any unpaid debts included in the arrangement is written off.
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- How long does it take to set up a Trust Deed?
A trust deed can be set up very quickly, it requires a telephone interview or face to face consultation when your Insolvency Practitioner will explain clearly and in detail what is involved. Even if the Insolvency Practitioner’s advice, given your individual circumstances, is that a trust deed would be the best solution for you, you are under no obligation to sign the trust deed and we will be happy to explore other solutions with you.
After you have signed the trust deed it is necessary for the Insolvency Practitioner to advertise the trust deed in the Edinburgh Gazette and write to all of your creditors. Your creditors have 5 weeks from the publication in the Gazette to object to the proposal set out by your Trustee. Provided no more than one third in value or a majority in number of your creditors object then the Trust Deed will become protected. This means that your creditors can no longer pursue you for recovery of any debt incurred prior to the Trust Deed being signed. Hence the term, Protected Trust Deed.
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- What are the main advantages of a Trust Deed?
A Trust Deed is a realistic and down to earth solution when you have money troubles, when creditor pressure is causing health issues and relationship problems or when it would take you many years to repay your debts
- Your finances are easier to control with only one affordable monthly payment to your unsecured creditors.
- You only pay what you can reasonably afford to pay
- All interest and charges on your debts are frozen once the Trust Deed becomes protected
- Creditor pressure is removed
- There is no Court involvement
- When the Protected Trust Deed is completed all remaining unsecured debts are written off.
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- What are the main disadvantages of a Trust Deed?
- Existing arrestments continue to be effective. Although Councils who carry out earnings arrestments are generally willing to consider lifting arrestments upon Trust Deeds gaining protection
- You cannot be a company director of a limited company unless the company's Articles of Association state otherwise
- The arrangement is binding on you as well as your creditors. If you were to default on the arrangement then the Insolvency Practitioner can petition for your Sequestration.
- Entering into any arrangement with your creditors may affect your credit rating.
- Creditors are not obliged to accept a proposal for a Trust Deed. However, the Trustee will negotiate with all of your creditors.
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- What effect will a Trust Deed have on my home?
You will still be expected to continue to make your normal mortgage repayments. A secured lender (e.g. the Bank or Building Society which holds the mortgage) is not bound by the Trust Deed and retains its normal rights.
The only interest the Trustee is likely to take in your home is in respect of your share in any "equity" available. A valuation of the property will be carried out and the level of any outstanding mortgage or secured loans established. Equity is the difference between the value of the property and the outstanding debts secured on the property. Equity will therefore be calculated and arrangements made for this sum to be paid to your Trustee. This can be done by re-mortgaging, a payment being made from a third party (often a family member) or additional payments being made at the end of the Trust Deed term.
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- What effect will a Trust Deed have on my car?
The Trustee's interest will only be in any equity which exists in the car. If the car is subject to hire purchase, this will be taken into consideration when determining any available equity. If your car is required to travel to and from work, in most instances you will be allowed to keep it for the duration of your trust deed. If however, the vehicle is considered expensive, the Trustee may suggest that you trade it in for a less expensive model.
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- What effect will a Trust Deed have on my household possessions?
Whilst the sale of household possessions is possible, in practice it is unlikely unless they have a high value.
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- What happens at the end of the Trust Deed?
Upon successful completion your remaining debt included within the PTD will be written off and you will then be free from your previous debt.
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- Who needs to know about the Protected Trust Deed?
After you have signed the trust deed it is necessary for the Insolvency Practitioner to advertise the trust deed in the Edinburgh Gazette and write to all of your creditors. Once a Protected Trust Deed is approved it is listed on the Register of Insolvencies. You may choose to notify your family or partner however, we recommend that you do.
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- How long does a Protected Trust Deed last?
Most last for 3 years, however this is dependant on your financial and personal circumstances. For information on your specific circumstances, speak to one of our dedicated advisers.
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