Hi saabrina.

Mark and/or Shona may choose to respond in due course if they wish to.

The legislation and guidance applicable to trust deeds is subject to interpretation. It's not uncommon for trust deed firms (and our experts) to come to slightly differing judgments on some issues.

Thanks TDA.
Usually advice from yourself and all the experts is all along the same thread, so I was quite confused by such a variance.

Hi saabrina

TDA is correct, as interpretation is one of the biggest issues. This is clearly evidenced by the postings on the forum.

As a firm, I ensure that we follow the Bankruptcy Scotland Act, PTD regulations and Statements of Insolvency Practice guidance. That way when an individual seeks advice there is NO room for error and what they are told at the start is binding on all parties. No grey areas, no doubts and no misinterpretations.

Im doing a report to court against an ip at the moment which I'll expand on tomorrow and this absolutely highlights the problems on property/equity etc etc for people caught in the 'it will all be fine' advice.

I'll revert back to my thousand other posts. Have a meeting, discuss everything and ensure all matters are agreed and confirmed in full before doing anything.

Mark

Hi saabrina

I can assure that that we also follow the sane legislation as Mark, (believe it or not).
Under no circunstances would I advocate that people just enter into Trust Deeds, and leave their equity to chance. There is no place for 'it will all be fine' advice, and the legislation is very clear about that. The Act states that equity should be dealt with as soon as possible (within the first year). My firm request, and pay for, a valuation as well as getting redemption statements from secured lenders, before anyone signs a Trust Deed. That way there are no mistakes or misunderstandings. The guidance does however, advise Trustees to:
"consider all available options for realising the equity in a property to try and ensure the most cost effective means of realising the maximum return from the estate."

"expects a Trustee to consider the implications any action over a property will have on the debtor and their family."

With this in mind, my firm believe that in order to force a sale, it would cost the Trustee a minimum of £5k, and that is not in the best interest of either creditors or debtors. Bearing in mind that a Trust Deed does not actually give a Trustee the right to force the sale of a house, the Trustee would have to apply for the debtor's sequestration first.

This has been common proctice for 3-4 years now, and I can honestly say that I have never had a creditor question it.. not once. It seems a sensible way to look at it. Remember, it is a TRust Deed, so it's upto the Creditors to accept the offer, and like I say, it is never a problem.

Mark said he was doing a report for court, but from his comment it sounds like it was regarding equity not being dealt with properly. It will be interesting to see what happens there.

If you read other posts, you will notice that Kevin agreed with my comments regarding equity, and disregarding the £5k, so maybe Kevin will come back and comment on this.

Hi all

as mentioned earlier, the biggest danger is interpretation of rules and regulations and that is why everyone on the forum strongly advises that all matters in connection with equity, overtime, assets etc etc is clearly defined so as to leave no room for error.

The report I am working on is almost like an exam question of how things shouldn't be done. A guy is referred to an IP. He is interviewed by, a fairly junior member of staff who completes about 25 percent of the paperwork, has no copy ID, creditor or wage info, but advises a Trust Deed to be the best option @ £250 per month contribution and half share equity at £8k.

Unfortunately, the guy was on Jobseekers allowance at £140 per month and these payments CANNOT be taken by a Trustee. (Social Security Administration Act)so there should be no contribution. 3 Years down the line he has paid £9k contributions, but cant pay the equity and the Trustee raises an action to sell the property. When, in effect, his wife has paid the equity plus £1k, which have been disguised contributions. The report/Statement of Affairs to the creditors shows his 'Salary' at £1,470 when in fact this is his wife's income, JSA, and child benefit.

Interesting to see how this turns out!

Mark

Interesting case. The Accountant in Bankruptcy have certainly made it very clear lately that anybody who relies solely on benefits should not be asked for a contribution in a trust deed or sequestration.

With reference to the debate about the £5k equity discount, this is something that we regularly do too, as well as a great many other insolvency firms I believe. Creditors are happy with it, as are the Accountant in Bankruptcy presumably given that they supervise trust deeds now and must be well aware that this is routinely done but haven't said that there is any problem with it.

I think both Shona and Mark are in agreement that as long as the situation is clearly agreed in writing at the outset then there should be no misunderstandings which can lead to the kinds of problems we sometimes hear about on the forum.

Thanks Kevin for your comments.

With regards to Mark's case, it is shocking that these practices are still going on. As already stated, social security benefits canot be used as contributions, and anyone giving advise should know that. Hope you let us know the outcome Mark.