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Topic starter
05/02/2013 2:05 pm
We've been contacted offline by an IFA who is looking for advice (and who is struggling with their internet access).
I wonder if our experts (and anyone else with relevant personal experience) could share their views on the following scenario please:
A self-employed Independent Financial Adviser has debts of around £50k, a home in negative equity, and a vehicle valued at around £3000.
He plans to soon cease being an IFA and to start in salaried employment. He estimates his disposable income to be around £300 once he has begin this job.
Because he has traded in this calendar year he will be liable, next year, to pay towards the Financial Services Compensation Scheme and possibly other industry-related costs. In total these costs might amount to several thousand pounds next year.
He will also remain liable for the advice that he has provided in the past. Should he be dragged into a future mis-selling situation he may become liable to make payments to former clients. He also fears being handed a bill for the costs of the FSA (or their successors) investigating such a situation (as such costs are apparently split between those who traded at the time).
There are therefore as yet unquantified but certain bills to follow next year related to activity up to this point.
There are also therefore as yet unquantified risks that might lead to bills and costs in the future.
The question is whether these unquantified elements would be covered by a protected trust deed, by sequestration, and whether there are difference between the way they would be covered by either of these options.
Hopefully I've captured the essence of the question that has been posed.
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds 
05/02/2013 2:30 pm
Hi TDA
Yes, they are contingent debts. Generally debts which cannot be quantified until something specific happens. Similar to a house repossession where it is sold a year down the line and the shortfall is then a precise figure.
Mark
Mark is not posting regularly in the Trust-deed.co.uk forum.
Topic starter
05/02/2013 2:32 pm
Thank you Mark.
So in each instance, protected trust deed or sequestration, they would be treated as contingent debts in the same way?
In practical terms what would happen if a liability for a mis-selling claim arrived in 5 years time? Would an IFA refer them to the trust deed or bankruptcy and that would be the end of it as far as they were concerned?
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds
05/02/2013 2:55 pm
Hi TDA
Yes. I have quite a few IFA Trust Deeds in almost identical circumstance.
It's a good question. Generally the debt or potential debt existed before insolvency and becomes a claim irrespective of discharge. The belts and braces approach would be for the Trustee to notify all contingent creditors. If it was thought that the claim may be resolved shortly after the 3rd anniversary, then he could remain in office to deal with this. In sequestration, the creditor can approach the court/Trustee to place a value on the claim. Slighty more complicated in Trust Deeds, although I suspect the same provision could be used.
Mark
Mark is not posting regularly in the Trust-deed.co.uk forum.
