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Topic starter
20/05/2010 10:23 pm
Hi
My sister in law has ?ú90,000 debt. The bulk of this is with Northern Rock ?ú74,000. They had passed this debt on to an agency who have been bullying and harrassing her for the past month. On top of this she has a mortgage for ?ú235,000
She is in full time employment with earnings of ?ú32,000 P.A. Her mortgage is in joint names with her ex partner who has ran off and left her in this mess. the flat is in negative equity of approx ?ú12,000.
She spoke with an IP who advised that a trust deed would be the best option for her. At an initial meeting the IP reckoned a payment of approx ?ú400 a month would be likely. She felt she could just manage this as well as continuing to pay her mortgage which the bank agreed to change to interest only last year. This will be reviewed in another years time.
The IP has now came back to say that following discussions with Northern Rock's agents Grant Thornton, the monthly payment will likely be nearer ?ú500 per month. She doesnt feel confident about managing to pay this figure.
I advised her to speak to another IP that a colleague recommended which she has now done. He has suggested a figure of ?ú300 a month and says he wouldnt be negotiating with Northern Rock. He says that if Northern Rock refuses then he would head down the bankruptcy route.
We're both now more uncertain than ever about whats the best way to go. I see from some earlier posts on your site that negotiating does happen in some cases but not in others. We are really needing some advice on the best way to go? The first IP has the paperwork ready to sign. They have explained that should their services no longer be required then there would be a charge for the valuation survey on the flat which is seems fair enough.
If she chooses to go with the second IP would it be likely that Northern Rock will not accept the offer of ?ú300 a month especially if the first IP has already entered some discussions? and what would the implications be if she was to enter bankruptcy? would she be able to keep her flat?
apologies if this is long winded.
21/05/2010 9:29 am
Hello dizzco,
Northern Rock have pretty firm acceptance criteria. These focus in part on the level of fees being charged by the Trust Deed company. Often Northern Rock's objections are connected to proposed fee levels which the Trust Deed company can then, if they wish, agree to a reduce to gain Northern Rock's support.
As such I would be asking each of the Trust Deed companies how much they are proposing to charge in fees as this will have an effect on the size of the monthly contribution required for a Trust Deed to be viable.
None of this should lead your sister in law to make a commitment to pay an amount each month that she cannot afford. This will likely lead to a failed Trust Deed anyhow which defeats the whole purpose of the exercise and will cause pain and stress in the interim.
As the home is in negative equity the threat to the home in bankruptcy, provided that the mortgage is paid, is diminished.
I would be interested to hear from the experts whether they feel that the quite significant mortgage size (and I would imagine monthly payments?) might be a matter looked at further in sequestration?
In bankruptcy she would normally be expected to pay what she could afford towards the debts for a period of three years. This is a similar outcome to that which would arise from a Trust Deed.
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds 
Topic starter
24/05/2010 10:46 am
Hi
Thanks for your reply. Would any of your experts like to answer your question re the mortgage payments and sequestration. At the moment the mortgage is interest only and the payments are ?ú431 monthly, this is fixed for another year at the moment.
What would Northern Rocks criteria be for calculating what they would expect as a monthly repayment figure?
Thanks again
24/05/2010 1:05 pm
Hi dizzco,
With a monthly payment of ?ú431 on the mortgage I cannot see that there is an issue. The concern was just that the mortgage balance seemed quite high which may have been accompanied by a very high monthly mortgage payment (which it isn't at the moment).
The guidance to Trust Deed companies is that, when the Trust Deed begins, there should be an expected return of at least 10% of the total debt AFTER the Trustee has drawn their fees. This guidance applies to the Trustee but is not directly driven by Northern Rock.
Northern Rock themselves limit the proportion of the total payments made that they will accept being drawn as fees by the Trustee (amongst other criteria). Kevin or one of the other experts may be able to add some detail to this.
Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds
24/05/2010 1:31 pm
Hi dizzco,
?ú431 pm certainly isn't excessive so I wouldn't imagine there would be any requirement for your sister-in-law's house to be sold given the negative equity.
The issue of the monthly repayment figure is a bit of a red herring. What is paid into a trust deed each month should be purely based on what your sister-in-law can reasonably afford, which sounds like ?ú400pm approximately from what you have written.
Whether the trust deed would be acceptable to Northern Rock would depend upon the level of costs estimated by the trustee (including fees, statutory outlays, VAT) in comparison to the amount that is being collected by the trustee towards the debts. Based on the usual costs of the firm I work for, I can see no reason why Northern Rock would not accept your sister-in-law's Trust Deed proposals at ?ú400 per month. Presumably the firm that have said that her payments would need to be ?ú500 per month feel that this is what she can actually afford as they shouldn't be asking for more money from her just so that they can charge a higher fee but still meet Northern Rock's criteria.
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