As far as I can see there aren't really any.

It's certainly true that the two procedures are very similar in a lot of ways. There are also several differences - too many to give anything like an exhaustive list here, but mostly technical/procedural.

Fundamentally, a Trust Deed is an agreement and cannot be forced on someone, whereas an individual can be sequestrated against their will. So in that sense, bankruptcy is much more of a method of forcing someone to repay what they can to a debt, whereas a Trust Deed is consensual with creditors. And of course, that difference doesn't really apply if someone is considering whether to apply for sequestration themselves or not.

Generally speaking Trust Deeds can be more flexible, with more room for manoeuvre when it comes to dealing with assets, eg equity in a home.

There are also more formal restrictions associated with Sequestration (eg cannot be director of ltd co), as well as potentially more consequences for things like employment contracts in certain industries.

It is hard to say whether someone's credit file is more damaged by a bankruptcy than a trust deed. That is certainly a common conception, though I'm not sure how true it is.

I think a lot of people just prefer to feel that they are coming to an agreement that their creditors have accepted, which the Trust Deed gives them. Less of a sense of shame/guilt about the whole process than they might feel with a bankruptcy and all of the stigma that carries with it. If they can afford to set up a Trust Deed which has the same effect as bankruptcy then why not?

Thanks for taking the time to explain Kevin.

Hi Firewalker.

As a debt adviser, we're responsible for letting people know about all of their options. From a professional perspective, sequestration often seems to be the best option (to us - who aren't emotionally involved and think primarily about numbers/outcomes) and we tell people that.

The response from some enquirers is a flat refusal to engage on the subject. The perception of stigma is a massive part of that I think, as are misconceptions and myths.

Some other enquirers listen carefully, recognise the benefits, but then confirm they'd prefer a trust deed anyhow.

Here's what we learned when we surveyed members of this site about that subject in 2012:

https://www.trust-deed.co.uk/Documents/2012SurveyExecutiveSummary.pdf

From that executive summary of the report, here's what people had to say about the subject of stigma:

Stigma
Debt solutions perceived as having a lot of stigma were:

-Bankruptcy 87.7%
-Trust Deeds 46.9%
-DAS 23.0%
-DMPs 19.4%
-Self managed repayments 7.8%

"Women tended to feel more stigma from all types of debt solution than men did. Just under three quarters of respondents would hate other people to know they were bankrupt, rising to more than four out of every five among Home Owners with a mortgage. This compared to just over two fifths of people who would hate others to know they were in a Trust Deed, rising to well over half among Home Owners with a mortgage."

Oh... I'd forgotten that this line was in that executive summary also:

"Overall, 96% of respondents were happy with Trust-Deed.co.uk and significantly more than half considered the site excellent."

Sorry - couldn't resist!

Hi Firewalker,

It's a good question and I think it really comes down to individual circumstances of the person considering a Trust Deed V Sequestration.

I've tried to give an example of different circumstances whereby a Trust Deed can be different from Sequestration.

A Trust Deed is effectively the individuals proposal to their creditors. It's up to the creditors to either accept or reject the proposal. As long the proposal is accepted by the creditors and meets the criteria for protection set out under the regulations then it becomes protected, the person pays the payment and is debt free at the end. The benefit of this is when it comes to dealing with assets as a Trust Deed can be a little more flexible.

In relation to assets and in particular a property, commonly if someone has for example 15-20k of equity and their debts are more than their equity value (£30-40K) we will propose 1 extra year of payments at the end of 4 years to pay over a proportion of this.

Under a Sequestration if someone has equity of 15-20k then their property could be at more of a risk as it's the Trustees responsibility to ingather as much asset value as possible for the benefit of creditors. Under the Trust Deed, the creditors have agreed and accepted that they may only get (for example) £1,800 in representation of the equity. It's them who decide if they are happy or not.

It can also have implications for people who are directors of limited companies. Under a Trust Deed you can, under a Sequestration you can't for the period that you are un-discharged i.e. 1 year. This isn't that common but can't be a factor. As Kevin also points out potential implications for current or future job roles etc.

In a Trust Deed the client has to pay a payment which the creditors will accept. Depending on their budget they may not be able to afford this. If this is the case they could have 2 options, 1 reduce their bills to pay the payment or 2 proceed with Sequestration where there is no minimum payment and no risk of defaulting on the payments or trying to sustain a payment which is unrealistic.

If a client's circumstances change during the Trust Deed their payments can change. If however the client is unable to afford the payment then the risk is the Trust Deed can't complete and they could be back at square one having to then consider Sequestration and a potential for another 4 years of payments. In a Sequestration the payment can be reduced or even stopped and ultimately it's complete closure which is what I like.

To sum up without being too long winded it really does come down to that individuals circumstances. Sometimes there isn't any difference and sometimes there can be quite a difference.

This is why speaking with a qualified expert is key as they can explore all of the clients options, explain the pros and cons and then allow the client to decide which option is the best one to proceed with.

Thanks everyone for taking the time to answer with all the information.

The survey was also good information, since it perhaps reflects public opinion and bias (unconscious or otherwise) perhaps applied by employers. I, too, chose the TD as a way of salving some of my conscience by paying what I could.

From what is written, in practical terms, it depends on the person's career and assets (apart from their personal view of sequestration).

It would appear to me that if you have no assets/equity and you do not intend to be a Director of a limited company, you could be discharged after a year, whereas the Trust Deed lasts for 4 years plus.

Also, is it the case that you can offer to make a full and final payment to end the sequestration earlier if you come into money, and with the Trust Deed that is no longer possible?

Can I stress, this is just for my information and understanding, and not to give anyone advice (not qualified or knowledgeable enough and I would direct someone to this website). Having gone through the TD process myself, and knowing that changes have been implemented, I wondered if there was any change in decisions towards sequestration rather than TD?

I know you are all busy, and you kindly advise on here in your spare time (often late). So, it is not a burning issue - just curious and to understand more - and perhaps interesting for others too.

Hi Firewalker,

Under Sequestration if you co-operate then you are discharged after 1 year. You are discharged from the restrictions and the debts. If you acquire or inherit an asset then this is still captured for a 4 year period so in a way it's still 4 years. Also, if an asset was discovered after the 4 years than should have been included in the Sequestration then it can be recovered and realised before the end of the 5th year commencing with the start of the Sequestration.

Also under a Sequestration the client still has to pay a payment per month for 48 months. Similar to a Trust Deed.

You can also make an offer to pay off the Trust Deed early but it needs to be repayment of full debts, plus interest and costs. If you came into money it's treated the same way on a Sequestration as it is on a Trust Deed. If the money or asset is sufficient to clear everything off then it's brought to a close regardless of which option.

Practically if someone puts aside the stigma and their assets are minimal or they have no equity then Sequestration has the guarantee that it's complete and final closure. I someone loses their job or is unable to work the then payments stop and the Sequestration is closed off. On a Trust Deed it can be at the decision of the Trustee what happens. This could be continue with the Trust Deed longer, discharge the debtor from their debts or simply discharge them but not from their debts which they would then need to consider Sequestration.

In my experience people would rather try for a Trust Deed and avoid Sequestration and that's supported by your view and the statistics that TDA has shared with us.

Debt is more mainstream than ever and over the last 12 years I have certainly noticed a real difference in people's opinion and perception of debt. I've found that more people talk about their debts and the number of people that call me and advise that they have spoken with a friend that I've helped and can I help them.

Hi Firewalker.

Interestingly, I don't think the survey reflects public opinion at all.

We invited members of this website at that time (by email) to take part in the survey online. The survey sample was therefore almost exclusively people with very real personal experience of the consequences of problem levels of debt and their decision-making process that accompanied that experience and reality.

While we built the survey questions alongside the research company that handled the project for us, the questions were reviewed (and significantly amended as a result) after a consultation process with a panel of volunteer Trust-Deed.co.uk members.

The survey results themselves are actually quite a unique insight into the decision-making process of those that have "been there". There's not a huge amount else out there in terms of "mindset" decision-making research on this subject and the findings certainly fed into a significant debate that was going on at the time.