I would imagine the estimate of funds would be noted to creditors as an expected return.

Dont know how long a trustee could sit holding creditors off if a sale price wasnt reached.

I would imagine that selling costs would come off the equity but not 100% on this.

Theres a lot of ifs and buts involved in that hypothetical. Do you mean if the equity was to be offered as a sort of full and final rather than a 36 month trust deed?

Paul

Thanks Paul

I was assuming in this scenario that the funding of the trust deed (or bankruptcy as is more likely for me) would require the sale of a property. If a certain amount has been assumed/judged likely to come from that sale and it then does not sell at the required price level.

Hi Pamjo.

Plasticdaft is going down the right lines as usual.

The trust deed provider needs to take a commercial view of selling costs, and time to sale, as both will affect what creditors may eventually receive.

The duty of the Trustee is to try to generate funds for creditors, so they must be mindful of selling costs and the build-up of their own fees while they manage a case.

PLasticdaft's not so daft!

Thanks both, Is this the reason for what we hear described as a 'forced sale price' being used for valuations?

If a potential buyer offers less than the amount suggested to creditors, do trustees have an obligation to continue marketing, or would the shortfall from expectations be added to the debt in the trust deed or bankruptcy?

I may be confusing issues here, the main point of the question is can a property be repossessed and lead to greater debts if the price achieved is less than thought.?

Trustees are experienced in this and will know if a better value is likely to appear sooner rather than later,even with the housing market as poor as it is in some ares.

I believe any mortgage shortfall can be included in a trust deed/bankruptcy.

Paul

Thanks Paul- I really meant in the case of a shortfall in the expected equity released by the sale. I should possibly refer to it as the reduction in equity achieved.
I gather a negatively borrowed property wouldn't be sold anyway. If voluntary repossession was chosen, that shortfall would be owed to the lender on an unsecured basis and then included in the debt total?

Potentially the costs to be included in the bankruptcy would be less by choosing voluntary repossession.
I expect the truth is I won't know until valuations are sought.!

A Trustee will be pretty realistic about potential selling values when making proposals for a trust deed to creditors Pamjo.

Thats not necessary for a sequestration; if the property can be sold for the benefit of creditors it will normally sold (or the money raised by other means). If it cannot benefit creditors then there is obviously no point in selling it.

Just to agree with TDA. The Trustee should try and get the best price for a property - it is their duty. However, if a property has been up for sale for a while, and simply not moving, the Trustee may consider a reduced offer, taking into account the continued marketing costs, and the expense of the the trustee's timee. If they get less than the creditors were intially advised of, it should not really have an impact on you directly, it just means the creditors will not receive the dividend they were expecting. The trustee will advise creditors why he/she accepted a reduced offer. After all, you can't get blood out of a stone, and the information creditors receive at the beginning is an 'expected' dividend based on the informaton at that time.

Thanks-TDA I'm not sure I follow the difference between TD and Sequestration on this point?

Shona-if the market falls further and it changes the likelihood of equity, are the costs accrued added to the overall debt.? I'm thinking if the benefit of selling is no longer realistic and marketing stops to cut costs? Will the property still be sold. Also, can a voluntary repossession be undertaken before and during a trust deed or bankruptcy?

Hi Pamjo.

In bankruptcy, the selling costs will diminish the return that creditors will get.

Regards the difference between a trust deed and bankruptcy:
In a trust deed creditors agree/object on the basis of what they told is expected to be the dividend (which may change if property prices change).
In a bankruptcy they have no role in accepting or objecting in advance; they receive a dividend based on what has actually happened.

Costs accrued by a trustee during a trust deed or sequestration are paid out of the funds that are gathered in, thereby reducing the dividend that is available to creditors. It is therefore common for a trustee to consult with creditors before making any decisions that may result in significant costs being incurred that may or may not eventually prove to be cost-effective.

A voluntary surrender of property can be done at any time, but if during a trust deed or sequestration then the trustee will be involved in the process too.

Thanks TDA and Kevin!!