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JohnO
New Member
3 Posts |
 Posted - 16 June 2010 : 21:30:34
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Hi,I am considering setting up a trust deed, here's some details on how i stand at present:
Debts:
1. Bank of Scotland Loan £10,000 - £241 Per Month
2. Virgin Visa Card £4700 (Interest free till Nov 10) £200 Per Month
3. BOS Overdraft £3400 (£60 interest per month) £60
4. BOS Acc2 Overdarft £3000 (£60 Interest per month) £60
Total debt approx £21k repayments £561 per month.
I am a joint home owner which I pay £550 per month into a joint account to cover mortgage, Elec, Gas, and Council tax. House worth £115k and still have £100k to pay.
My wage is £1430 paid every 4 weeeks which leaves me about £300 each month for fuel & food etc, etc, etc.....
What's your thoughts?
Thanks John
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Trust Deed Assistant
Trust Deed Expert
6724 Posts |
Posted - 17 June 2010 : 09:24:05
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Hello JohnO,
It's very difficult to provide direct conclusive advice on options without having worked through circumstances in greater detail than is possible on a forum such as this.
One thing that I notice is that you jointly have £15000 of equity in your home. This effectively means that you have an asset of £7500 if that valuation was used for a Trust Deed.
In a Trust Deed you will be required to pay what you can reasonably afford each month for a period of time (usually three years). You will also need to contribute the value of your assets. That means that you might need to find £7500 to bring the Trust Deed to an end.
This used to often be dealt with by remortgage but currently the mortgage market rarely supports this. You might therefore rely on family/friends coming up with the money for you, making additional extended monthly contributions to cover the equity, or even have to look at selling the home.
Another key factor is the valuation itself. Valuations for Trust Deeds tend to be lower than that which might be provided by an estate agent. The reason for this is that, if it were required, the sale of a home by a Trustee would normally be handled quite quickly rather than via a long process of obtaining the very best price possible. This might make a difference as to whether equity in your house should be of concern to you.
Are you confident that the valuation of £115000 is realistic for a fairly quick sale?
After all of your costs how much do you feel that you could contribute on an ongoing basis towards a Trust Deed or other debt solution each month? |
*** Qualified Debt Adviser & Trust Deed Forum Administrator ***   |
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Kevin Mapstone
Trust Deed Expert
1863 Posts |
Posted - 17 June 2010 : 09:46:18
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Another point to note in respect of the equity in your property is that the realisable equity is generally a bit lower than the actual equity figure - this is because in practice if you were remortgaging or selling your home there are usually costs involved. We would take this into account when assessing how much would have to be paid into your trust deed.
For example, if there is joint equity of £15000, it is reasonable to assert that the realisable equity is only say £11000. Your half share of this figure is then £5500, which may be all that would be required to buy out your equity in a trust deed rather than the full £7500 half share. Hope this makes sense.
This amount would normally need to be paid in by a third party or paid by yourself after the normal 3-year trust deed period (or a combination of both), as Trust deed assistant says. |
*** Recommended Trust-Deed.co.uk Partner *** Click for Kevin’s help starting a Scottish trust deed:  |
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JohnO
New Member
3 Posts |
Posted - 17 June 2010 : 11:42:19
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Thanks for the info.
So say my assets come to £5,500 and debts are £20,000, I can afford to pay £300 per month for 3 years = £10,800 does this mean I still need to pay £5500 at the end of the deed? or can I pay £453 per month to clear the lot = £16,308. Saving £3692 ?
How does the money get cleared from the Loan/Bank Overdraft/Credit Card? Does the companies just close the account and clear the debts internally? |
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Trust Deed Assistant
Trust Deed Expert
6724 Posts |
Posted - 17 June 2010 : 11:56:14
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Hi JohnO,
You will be expected to pay as much as you can reasonably afford each month AND contribute the equity that is assessed.
As such if you could afford to pay £453 each month you would need to do this with the full amount of the equity being dealt with later.
I suppose that if you actually could afford to pay the £300 per month (that you mention) there might be the possibility that a 3rd party could top this up to a higher amount in lieu of the equity that would be due otherwise.
Interested to hear the thoughts of one of our experts when they next get chance to visit the forum on whether this could happen in reality... |
*** Qualified Debt Adviser & Trust Deed Forum Administrator *** |
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Kevin Mapstone
Trust Deed Expert
1863 Posts |
Posted - 17 June 2010 : 13:37:15
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That would certainly be an option, trust deed assistant, if a third party was willing/able to do this.
However, it would be a good idea to make sure you have considered all the options open to you JohnO - you may feel that a trust deed is not the best solution for you. For example, the Debt Arrangement Scheme can be a good way of repaying your debts at an affordable rate whilst protected from creditor action, and the issue of equity in your property would normally not come into the equation.
I would definitely recommend that you seek advice from a money adviser (eg local authority/CAB) or on a more detailed basis with an insolvency professional before deciding on how you wish to proceed. |
*** Recommended Trust-Deed.co.uk Partner *** Click for Kevin’s help starting a Scottish trust deed: |
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JohnO
New Member
3 Posts |
Posted - 17 June 2010 : 14:04:21
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Thanks for the advice.
Say I had no equity on the house,is it true if I pay £500 (which can be split over the first year) they can't chase any extra equity on my house after the 3 years are paid?
Is it best to move bank accounts before I apply for a trust deed? if so would I also need to move my mortgage which is with the same bank? |
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Trust Deed Assistant
Trust Deed Expert
6724 Posts |
Posted - 17 June 2010 : 14:35:33
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Hi JohnO,
You will need to find a firm that put this (the fact that the house will not be revalued) in writing to you before signing the Trust Deed.
Many firms charge £500 for this as you describe and this is considered pretty normal. A few do not charge this £500 at all. For example there are differences amongst the firms represented on this site as to whether £500 is charged or not.
Your mortgage should be fine provided you maintain payments.
If your current account is with a bank to whom you have debts getting a new bank account ahead of signing the Trust Deed is essential. |
*** Qualified Debt Adviser & Trust Deed Forum Administrator *** |
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catoneil
New Member
6 Posts |
Posted - 17 June 2010 : 16:43:33
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Hi all
If equity is looked at the way its described above taking account of selling costs etc, in the example 'if there is joint equity of £15000, it is reasonable to assert that the realisable equity is only say £11000'
What if the equity is £1000 or £2000, would the Trustee not look to recover this as selling costs would be greater than these figures?
C |
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funscots
New Member
4 Posts |
Posted - 18 June 2010 : 11:55:03
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| This is an interesting point as we are in a Trust Deed(s) and the equity will be quite low. If Kevin is correct then can we argue that there would be selling costs and not pay anything? |
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Mark McFadyen
Trust Deed Expert
2990 Posts |
Posted - 18 June 2010 : 12:15:11
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To clear the position with equity up, this falls under the AIB's guidance where equity is calculated by a professional valuation less the outstanding sums due on the mortgage (and any secured loans)
This is the sum the Trustee will seek. If the equity in an earlier post is £1k or £2k then the Trustee will seek this sum.
Mark |
*** Recommended Trust-Deed.co.uk Partner ***Click for Mark’s help starting a protected trust deed:  |
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Kevin Mapstone
Trust Deed Expert
1863 Posts |
Posted - 19 June 2010 : 23:19:19
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I think practice varies between different firms. In my experience, creditors are happy to accept a nominal £500 sum instead if there is only £2k equity and the funds are not readily available from a third party. After all, it would be practically impossible for a trustee to realise this equity without incurring higher costs in doing so.
There may also be early redemption penalties on a fixed-rate mortgage which reduce the realisable equity in a property. |
*** Recommended Trust-Deed.co.uk Partner *** Click for Kevin’s help starting a Scottish trust deed: |
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Mark McFadyen
Trust Deed Expert
2990 Posts |
Posted - 20 June 2010 : 11:28:02
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Hi all
I think the practices of various firms will differ from time to time. If you look at the basis of a Trust Deed, then the creditors ultimately have the final say, however the governing body of Trustee's guidance on the matter is quite clear and states as follows:
Where possible the trustee should seek to reach agreement regarding how the equity in a property will be realised, as soon as possible in the circumstances, and should realise the highest amount for the equity which the trustee thinks is obtainable in the circumstances of the case. The trustee should record on the file his reasons for reaching this agreement.
6.7 The trustee should note that the trustee can only accept income contributions from the debtor during the period prior to the debtor’s discharge. These contributions must not be applied to heritable property. Where however it does not prove possible for a third party to buy the property, the trustee should give consideration to accepting payment from a debtor’s surplus income beyond the agreed term of the contribution payments allowing the subsequent payments to be treated as payments for the heritage.
The purpose of SIPs is to set out basic principles and essential procedures with which insolvency practitioners are required to comply. Departure from the standard(s) set out in the SIP(s) is a matter that may be considered by a practitioner’s regulatory authority for the purposes of possible disciplinary or regulatory action.
Mark |
*** Recommended Trust-Deed.co.uk Partner ***Click for Mark’s help starting a protected trust deed: |
Edited by - Mark McFadyen on 20 June 2010 11:41:30 |
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Should I trust using a Trust Deed?