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Topic starter
14/08/2014 8:15 am
Hello
I'm seeking some advice for a friend - he has a PTD and seems to be in quite a dire, and I think unique, situation. I don't know a lot about PTDs and am really not sure how to guide him, any advice/information would be much appreciated.
D has had a PTD since November 2013, paying £200 per month on debts of approx. £30k. He earns £30k pa.
D's father has recently inherited a large sum of money, and wants to gift part of it to D to buy a flat (outright, no mortgage). His dad does not know about the PTD and D does not want him to find out. D seems intent on going ahead with this property purchase, but I'm concerned for him and the possible consequences.
My understanding is that he needs to inform his Trustee of the gift, or does it make a difference that he's not directly inheriting anything?
If he does not communicate with his Trustee before the flat purchase, what are the consequences?
If he was to inform the Trustee after the purchase, would he be forced to sell, or are there alternatives? Given that he wouldn't be paying rent (currently £700 per month), he could increase his PTD payments substantially.
Could the Trustee find out about this and prevent the purchase?
Just to complicate matters, D was recently convicted of embezzlement: he stole some money from his previous employer. The offence pre-dates the PTD, the conviction happened after he signed.
He is paying back the money he took, but has not informed the Trustee - I think partly because of embarrassment but also because he wants to fully re-pay his former employer.
Again, what are the consequences of him not disclosing this and including the employer as a creditor? Should he disclose it so that his repayments are included in his expenditure details (he's cutting back on other expenses to make the repayments).
Hope this all makes sense: any guidance on how D needs to take these matters forward with the Trustee would be very much appreciated.
14/08/2014 9:12 am
I'm sure one of the experts will be along shortly but
Yes, he would need to inform his Trustee about the inheritance. Any winnings, inheritance etc is looked at completely separately from the contributions. Acquirenda is assets acquired after the date of signing, but before the date of discharge.
If he doesn't, he could be forced to pay all of his debts, plus interest and Trustee fees.
I don't know if the flat could be purchased in the father's name and then transferred to D after he has been discharged, again the experts would be best to advise.
Not disclosing the money that he is paying back; as you say he is cutting back on other expenses to pay this. The worry would be is this leaving him "short" on his monthly TD payment? Trustees can use their discretion if they are informed of increased expenses. But as the offence happened before the TD, and it is an offence I don't know if they would give consideration to reducing payments.
14/08/2014 9:16 am
Welcome to the forum DrH.
If your friend acquires assets during the course of his trust deed they'll almost certainly "vest" in his trustee. The trustee will then be obligated to release the value up to the extent that the debts are fully repaid, plus interest on the debts, plus the trust deed fees.
This could add up to a really substantial amount of money. If it cannot be raised any other way, the property might have to be sold.
Is your friend repaying his previous employer out of choice or on the order of a court?
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Topic starter
14/08/2014 9:26 am
Thanks for the quick responses.
TDA - sorry, could you explain "vest"? Does this mean that the property would be assessed at the end of the Trust Deed and potentially sold if there is a shortfall between the contributions and full repayment of debts, interest, fees etc? So he could buy the property and increase his contributions as much as possible to try to reduce that shortfall at the end of the TD?
He's repaying the employer through choice.
14/08/2014 9:42 am
When a person signs a Trust Deed they are promising that any windfalls that come their way within the period of the Trust Deed will be made available to their Trustee - that would include property or cash.
Your friend would need to inform the Trustee about the property straightaway and it would then be up to the Trustee as to how to deal with it. They could decide that the property must be sold straightaway and the debts paid off in full from the proceeds, or they might agree to taking higher payments in the meantime and then revisit the property situation at the end.
Either way, your friend's new home could be at risk.
Regarding the repayments to his ex-employer, any spare income that your friend has is meant to be paid to his Trustee for the benefit of his creditors as a whole. He should notify the ex-employer of the Trust Deed and advise him to contact the Trustee to make a claim just like the other creditors.
Having said that, the ex-employer may not have to write off any remaining debt at the end of the Trust Deed like all of the other creditors do. If a debt is incurred as a result of fraud then it does not necessarily discharge (ie your friend may still be liable for any remaining debt to the ex-employer after the Trust Deed has finished)
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