Hello pdai11 and welcome to the trust deed forum.

There was recently a change that makes this a technical possibility. The reality however is that it will only happen if the creditors allow it to happen. The trust deed company would have to inform them that equity existed in the home, and they would have to consider this to be acceptable otherwise they could seek to prevent the trust deed from becoming protected.

The question that rolls on from this is why a creditor would agree to this? I'm not sure I can think of many reasons why they would agree; effectively they would be agreeing to accept less than the debtor might actually be able to pay (assuming that they were prepared to realise the equity in their home by ones means or another).

Our experts are likely to be able to add to this as I know they attended seminars and training in connection to the changes a couple of months ago.

Is this something that you're investigating because you do have equity in your home?

Hi pdai11, welcome to the forum.

New legislation was introduced at the end of last year to allow the exemption of the main residence of the debtor. It was introduced to exclude property with minimal or no equity. In practice I'm not entirely sure how many firms will utilise the new legislation as it is not the easiest procedure to follow!

It is unlikely that any Insolvency Practitioner would try to exclude, say ?ú20K of equity, as the ordinary creditors would more than likely object to the Trust Deed!

Hope this clarifies matters for you.

Julie

I agree with Julie, I think it will only be used where there is fairly low equity as creditors would probably reject the proposals otherwise - unless there is a very good reason why they shouldn't (for example, if someone in the family is disabled and the house has been extensively modified etc then there is a good argument to be made).

Hopefully as time goes by we will get more feedback from creditors as to what they will/will not find acceptable.

Thank you all for your information and advice. We do have equity from our house, around ?ú2000-?ú3000. The reason i wanted to know is whether to declare bankrupt or sign onto a Trust Deed as i don't want to have another debt after 3 years to source money on the equity to pay the creditors and i'm sure the house value would increase.

That need not be a concern pdai11 so long as everything is done properly in advance of signing anything.

Before signing a trust deed you would want to receive, in writing, a clarification of how the equity in your property will be dealt with. It's common at this point to agree that a valuation will take place at the start of the trust deed which will determine your full equity liability. A further valuation (towards the end of the trust deed) need not take place if this is all done properly.

Most trust deed companies, including those represented on this site, would be happy to proceed in this way.

Assuming this is all done correctly there would be no further exposure to releasing equity for you if property prices were to increase later.

Thank you for your excellent information.
Did not know this can be done and never stated on any websites i looked at.

The other thing to bear in mind pdai11 is the nature of the valuation used for a trust deed itself.

They are typically based upon what a property might be sold for if it needed to be sold fairly quickly. As such they tend to be lower than some people expect, and lower than might be provided by an estate agent looking to win your business for example.

You may therefore find that the equity is not an issue at the start of a trust deed (if there isn't any according to the valuation used). Provided that you have written confirmation that this is the only time that the property will be valued you'd then be left with just the regular monthly contributions to make.