Hi Marie b

could you advise me of the split of the debt ie how much is in your name, how much in husbands and how much joint and also is the Northern Rock unsecured element of the together loan included in the ?ú62k.

If interest is still being charged at this level, I think you need to review the options.

Mark

Hi Marie_b

If your unsecured loan to Northern Rock is included in your debts of ?ú62K, you will take at least 6?¢ years, at ?ú800 per month, to pay your creditors back, potentially longer if your creditors are not prepared to stop interest accruing.

Although the Trust Deed option would most likely be available to you, as you point out there is potentially ?ú45,000 of equity in your property, which I presume is jointly owned? The equity in your property would therefore need to be realised for the benefit of your creditors.

Another option available to you is the Debt Arrangement Scheme, which is run by the Scottish Government. This is similar to a DMP in that you have to pay all your creditors in full. Interest is frozen, however itÔÇÖs only written off if you get to the very end of the plan and repay the debt in full. This means that if you default in year five of a six year Payment Plan and the plan is revoked, there is six years of interest going to get backdated and added onto the outstanding debt. Your property is protected however and would not be at risk should you maintain and conclude the agreement.

Like Mark says we really need to know more information before we can point you in the right direction.

Julie

quote:

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Originally posted by marie_b

Hi, Really impressed with this site.
My husband and I are currently in a DMP, it started Dec'09. Paying ?ú700 p.m (soon to increase to ?ú800 because of wage increase)against unsecured debts of ?ú62K . All but one creditor, RBS, have frozen interest payments temporarily. One year anniversary coming up, are they likely to be happy to continue with this arrangement? DMP managed by CCCs so no management fees, initial recommendation was Trust Deed but we opted for DMP because we wanted to repay all debts.

Now thinking that realistically we will take forever to repay and impact on credit rating will be much longer.

Concerns

Northern Rock Together Mortgage - ?ú135K secured, ?ú25 unsecured against property value in region of ?ú170/180k.

Questions

Do we have an option of now going into PTD?

What happens if one/both of us get made redundant and we can't meet terms of Trust Deed or interest rate changes and mortgage payment increases?

Will unsecured element of mortgage mean that we have a lot of equity and put house in jeapordy? No option of getting third party involved in paying additional funds to meet this liability.

Having read that a few people seem to be caught out at the other end I just want to know what the down side is. I fully appreciate that there must be one if you only repay a portion of your debts.

Thanks

M

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Hi, Thanks for replying so promptly.

Joint mortgage - ?ú135K secured + ?ú25K unsecured. this hasn't been included in DMP per guidance from CCCS. we continue to make full mortgage payments including unsecured element.

joint debts - RBS loan - ?ú7.5k, RBS still applying interest.

husbands debts - ?ú41K split between 6 accounts, ?ú23k to egg

my debts - ?ú14.5K between 8 accounts.

in a DMP are the creditors likely to waive interest and charges over a long period? most have this year, but is this likely to continue indefinately?

Thanks

M

Hello marie_b,

There are circumstances where it is appropriate to leave the unsecured element of a Northern Rock "Together" mortgage out of a debt management plan. As payments are often made on a pro rata basis, and as Northern Rock was lending very large amounts over very long terms compared to other lenders, you sometimes find that their payment from a debt management plan would actually be larger than the contractual repayment.

However it would have to be included in a Trust Deed.

Trust Deeds are looked at on an individual basis. Therefore joint debts would "count" for each of you in full when working out how much unsecured debt each of you have. By my reckoning this amounts to ?ú73500 for your husband and ?ú47000 for you.

Using your lower valuation there appears to be around ?ú35000 of equity in the property, or around ?ú17500 each.

Given the level of your disposable income, the level of your debts, and the level of your assets, it does seem that a Trust Deed might be available to each of you.

The key question however is how the equity in your house would be realised for the benefit of your creditors during the trust deed. It used to be the case that people would remortgage towards the end of a trust deed to provide that money. This type of remortgage simply isn't available anymore and not many people think it will reappear anytime soon.

That then probably leaves you needing to rely on the support of friends/family to come up with the money, or facing the fact that the home would have to be sold to realise the money.

It may be that you consider the sale of your home in a couple of years time to be a worthwhile sacrifice for the benefit of dealing with the unsecured debts within a much shorter time period than looks likely via your existing debt management plan (or via the Debt Arrangement Scheme if you switched for the additional certainty and legal protection that it would offer you).

As such I'm not sure there are really any right or wrong answers in terms of continuing as you are or looking to other alternatives. It's probably a matter of weighing up what the most important factors and priorities are for you personally.

Sorry... in terms of your final question:

Creditors generally continue to freeze interest and charges during a debt management plan if they feel that they are being treated fairly. Reviews take place along the way to keep them up to date with your circumstances.

However there is no guarantee that this will be the case.

They may also sell the debts to other companies in the future.

As you have equity in your property it's also possible that one of the current creditors, or a future debt purchasing creditor, may be tempted to take debt recovery legal action against you.

The Debt Arrangement Scheme would guarantee that interest stopped and would protect you from legal debt recovery action. With no interest guaranteed you may clear your debts sooner.

However you are currently not paying any fees to your debt management provider CCCS. A proportion of your money would be taken to cover costs if you switched to the DAS scheme which might extend your overall repayment term to clear the debts compared to the existing debt management arrangement.

thanks TDA, this has been really useful and clarifies a few points. I think we now need to weigh up the pros and cons. I have found the info and advice on this site to be really helpful.

another question.....

if we go into a PTD and three years down the line we can't sell house or re-mortgage to release equity,what is likely to happen?

Thanks again

M

I think that it would be the Trustee selling the house for you marie_b.

In that respect this need not be an issue (provided that you're prepared to relinquish your ownership of it of course).

TDA is right Marie_b it would be the Trustee that would be selling the house.

You have quite a lot to think about, let us know if you need any further advice.

Julie

Hi, Needed time to mull this one over. Mixed feeling about house, it is mainly because of house that we are where we are. It is nearly the house of my dreams but still needs a couple of thousand spent on it. Not likely to happen any time soon!!

In a PTD at what stage would the house go on the market and what happens if the anticipated equity isn't there when trustee sells? Would we be liable for any extra money? Also, thinking of my pride here, would it be a standard sale through an estate agent. Would we have to leave the house before it went on sale?

Really beginning to get into the nitty gritty. Given the current economic climate and the prospect of redundancies....I understand if you default on the PTD then the trustee could/would make you bankrupt. Realistically if I went for DAS and we defaulted are the consequences any less severe? Would there be a good chance that we would be made bankrupt anyway?

I'm really trying to understand the pros and cons of each. The prospect of PTD and this being over in 3 years is tempting, albeit at the expense of the house.

Hi marie_b,

My understanding is that the house could normally be sold, if it had to be, towards the end of the Trust Deed.

I also understand that if it didn't achieve the anticipated valuation that would have no negative effect on you (i.e. that would still be the end of it for you).

The Trust Deed company would be looking for a relatively quick sale though they also have a duty to all involved to achieve a reasonable price. I would have thought that estate agents would be used in circumstances such as yours though practice may vary from firm to firm. Perhaps one of our experts could explain how they might handle such a sale...

If DAS were to fail you would effectively be directly responsible for the debts to your creditors again. This in no way means that you would have to go bankrupt but the creditors could seek this option if they wished.

Hopefully the experts can add their thoughts to this soon as the situation is quite different to that in most cases that are discussed on the forum (due to the significant equity and your potential willingness to move away from your home).

Hello marie b

If we were selling a property we would certainly use an estate agency - there wouldn't be any particular reason that your neighbours would become aware that the house was being sold due to an insolvency situation.

In terms of what would happen if your circumstances change, you would not necessarily be made bankrupt if you are in a trust deed - your trustee would have to weigh up the situation and what is best for creditors but there is a certain amount of flexibility in terms of suspending/reducing payments. As you rightly say, if you were in a DMP and you had a long-term change in circumstances you would have a problem anyway.

Another point worth making is that you and your husband do not need to follow the same route. Given his debts are a fair bit higher than yours, it may be worth considering a trust deed for him but you sticking with debt management. Therefore only your husband's half of the equity would need to be found to be paid to creditors in the trust deed. This may be more manageable in terms of not having to sell up (eg he could possibly extend the term of the trust deed instead to cover a large part of his equity).

I think you really need to go through your situation in detail with an insolvency professional to look at the various permutations as there a few details that would need to be factored in (for example - does one of you earn significantly more than the other??)

thanks Kevin and TDA.