Welcome to the trust deed forum Caroline.

Your question is really interesting and can be seen in a couple of different ways.

You are correct, in either a trust deed or bankruptcy the monthly amount you contribute will be based upon affordability (income minus reasonable expenditure).

As such, if you view the cost of the arrangement to be how much you actually pay in via monthly contributions, they're likely to be the same.

Another cost is the amount that you pay for either service (rather than the amount that you contribute). The trust deed firms featured on this site have told us that their fees typically are between £2500 and £4500 plus VAT and outlays (there will be exceptions to this). This money is taken from your contributions before any distribution is made to your creditors. You could view this as being at the expense of the creditors, but really it is you paying the fees.

The application fee to go bankrupt (to the AIB) is £100, obviously a lot less than the fees payable if you sign a trust deed. If contributions are made the company handling the bankruptcy will be able to draw fees before paying a dividend to creditors.

What does this mean for you?

I wouldn't worry about it too much. The most important thing is to consider which of the available solutions is the best fit for your circumstances, needs and preferences.

Ok thanks, that's v helpful.
So to sum up the amount you'll pay will be much the same even though fees may vary because higher fees just mean the creditors get less.
So firms promoting themselves on the issue of competitive fees compared with other firms are just pulling the wool over your eyes as the level of fees makes absolutely no difference to what you pay.
Where can I get truly impartial advice on which is best for me.
I have realised that all 3 out of 4 of those I've consulted have not given me the best or impartial advice (One intermediary and 2 IPs)
There is an obvious conflict of interest here as the solutions best for the client may not be the most profitable for the IP.
The CAB have no vested interest but alas very little clue

Hi Caroline.

The question of who is and isn't "impartial" is very tough as it's a matter of perception. Our advice would be to consult with a variety of sources of advice so that you can weigh up any decision you are considering.

I don't think that there is necessarily any "wool pulling" going on where firms discuss how much they might charge to run a trust deed. If their fees are lower there may be a greater chance that creditors will allow the trust deed to become protected. If their fees are lower they may also (in some instances) be able to run a trust deed over three years rather than an extended period. If that was the case, you probably would end up paying less overall.

It all depends on how a firm "sells" their lower fees I suppose. There may well be benefits from taking an interest in fee levels though, something I've often suggested people do in this forum before they choose a firm.

I take your point that there is a risk of a conflict of interest. All I can say is that there are a lot of very professional people in the industry that take a lot of pride in properly advising their clients on the pros and cons of all of the options available to them. There are also some incompetents and sharks, as is the case in any industry sadly. You also have to bear in mind that debt advice isn't a black and white science. A degree of judgment has to be exercised by an adviser which can result in different opinions being put forward.