Hi Lindsey

Can you provide a bit more information. level of debt, amount you can afford to pay, details of any assets etc.

Mark

Hi Lindsey,

Bankruptcy and a Trust Deed can be very similar and they really don't have much between them depending on your circumstances.

In terms of employment prospects, a Bankruptcy could have more of an impact on this than a Trust Deed would.

I know that on a lot of application forms you can be asked if you have ever been declared Bankrupt but it's not that common for people to be asked if they have ever signed a Trust Deed.

In terms of the creditors, in a Trust Deed they are required to review a proposal and decide if they are going to accept it or not. As a result of this and working to criteria that the creditors set, you can sometimes be required to make adjustments to your household budget to be able to afford a payment that your creditors will accept in a Trust Deed. A Bankruptcy doesn't require the consent of the creditors so in many ways you may not need to be as strict with your household budget and sometimes the payment can be a little more affordable.

A big difference at the moment will be that the minimum timescale for a Trust Deed will be 4 years whereas in a Bankruptcy this will be 3 years (until this is changed in 2015).

A lot of the time it really does come down to individual circumstances and what the client wants. Some clients will not even consider Bankruptcy and will want to avoid that at all costs. I tend to find that it's the more mature clients that have this way of thinking. A Trust Deed appeals to them because they want to pay back what they can afford with the acceptance of the creditors.

Younger people can have a different attitude towards Bankruptcy in that it's not as bad as the older day myths i.e. bailiffs etc.

Often people don't know enough about Bankruptcy to make a decision on it. A good advisor should take you through exactly how a Trust Deed and Bankruptcy work and then allow you to make your mind up with regards to what one you want to choose.

Iwas advised with bankruptcy you pay £200 and thats u no more payments...... And it only affects you for a year? Someone close to ke has just went through it and this is what they have done with some help from the CAB office?

Mark i have 25000 debt could afford £200 per month my flat is rented and i have a car that cost me £200

Hi Lindsey,

Ah, the old ÔÇ£pay £200 and that's you no more payments...ÔÇØ

The £200 is the Accountant In Bankruptcies fee for processing the application. Everyone has to pay this fee to apply for their own Bankruptcy.

If someone is in employment and can afford to make a payment per week/per month then they are required to do so. If someone is on state benefits then they are not required to make a payment.

The payment is based on affordability and calculated by taking into account the income, less the household bills and expenses and what is left over is normally what a client would pay providing it fits with the guideline expenditure figures.

A Bankruptcy lasts for 1 year at the moment and then you are automatically discharged from it and your debts. You still have an obligation to co-operate with your Trustee and finish making any payments.

Often people are told that by going into Bankruptcy you are not required to make any kind of payment and the debt is written off. They can be told this from a range of organisations who unfortunately provide inaccurate information.

Back in 2009 this way of thinking was a bit of a problem for Wylie Bisset. We secured a large contract with the Accountant in Bankruptcy to administer Bankruptcies on their behalf and as part of that we were required to establish if a client could afford a payment or not. Due to the advice that clients were being given about not having to make any kind of payment we had to organise and run road shows in Glasgow, Edinburgh and Inverness for organisations to attend so that they could advise their clients that they would need to make a payment if they were in employment and could afford to do so. We asked John Cook the deputy head of the AIB to attend and speak on behalf of the AIB to get this message across.

Unfortunately if you can afford to then you would need to make a payment to the Bankruptcy for a period of 3 years.

Hi Lindsey

I think both the Trust Deed and sequestration appear to be viable options. In both there would be a requirement to maintain a contribution for the 3 years period of either the Trust Deed or sequestration, although the Trust Deed changes to 48 months on 28 November.

I thinkl the £200 may have referred to the actual costs of petition for sequestration.

Mark

Hi Lindseywalker87.

It is a bit confusing.

Another way of looking at it is this:

If you can afford to pay towards your debts you'll be asked to do so in both bankruptcy and trust deeds.

If you cannot afford to pay towards your debts you'll have no access to a trust deed but bankruptcy will still be available to you.

Trust deed still looks like better option then thanks guys..... U make it all soo less complicated

Hi Lindsey

To be honest it is. If you know exactly whats ahead and everything is agreed beforehand, then it should run without any issues.

Mark

What about all these people that never seem to get discharged after there final payment and stuff? Also been advised i may be forced to sell my car to put extra cash into the pot? And also some of my debts are only a few months old will this have any effect

Recents debts or old debts are all debts so dont worry about that.

Can one of the professionals point out what would go to creditors in both scenarios? ie an idea of fees involved in a trust deed v banruptcy costs.

Paul

Hi Paul.

Hopefully one of our experts can comment on relative fee levels in their experience.

It's important to remember that one of the reasons that creditors accept trust deeds is that they're expecting a better return than bankruptcy would produce.

Hi Lindsey.

There are certain firms that have delayed people's discharge due to PPI. The firms that post here (and plenty of others) will not.

How much do you think that the car is worth?

How large are the more recent debts? Were they taken out for a particular purpose or just to help with living expenses?

The advice about selling the car to put more money into the pot is complete nonsense! Any car worth less than £3,000 in value is automatically not taken into consideration.

Fees in a Trust Deed are pretty much fixed by the creditors nowadays and can range between £2,500 and £4,000 generally. Fees in a Sequestration are not fixed as such by the creditors at the outset and as result can range a little higher.

It shouldn't be a problem with regards to your debts being a couple of months old. Your creditors will have the opportunity to object the proposal if they are unhappy with this. In the past I've known some creditors to object to a proposal if the debt was taken out in the last year but I've not seen that happen that much nowadays.