Welcome to the Scottish Trust Deeds forum sisteract.

Your brother will need to liase with the Trustee now to see where this can be taken. I'm sure Mark or Kevin will be along soon to more specifically address some of the questions you have asked.

In terms of your Question 5 this would be normal practice in this scenario so please don't worry about that too much.

Hi Sisteract

In answer to your points:

1. If the TD is not accepted then yes he should cancel payment as the Trustee will not continue with the TD and opt for sequestration.

2. The Trust Deed commences when the Deed is signed, not when it is agreed. The majority of work involved is at the start, so this will almost ceratinly be used for the work to date, the outlays and possibly the sequestration costs.

3.I think you mean the creditors. The answer would be no.

4. Yes the Trust Deed is still in force.

5. One a TD is signed, he cannot make payment to creditors.

There is a lot of mis information about sequestration, however I'm sure Kevin will agree that the vast vast majority of cases which go to sequestration follow the exact same path as the TD would have.

I hope this helps.

Mark

Hi there

Thanks for the information. As you may have guessed I know very little about Trust Deeds....what I do know I have learned from your website (ta). I am personally amazed that Trust Deed companies inform their 'customers' to stop all payments to creditors before things have been finalised (this would send me into a not very bonny panic). I would like some more clarity on certain points if I may.

1. As far as I understand it once you enter into an agreement with this type of company you have 2 options. The 1st being a TD, then if this is refused, sequestration. Is there now no way out of this 'scheme'?
2. If you are able to stop direct debit payments to the TD company (since the TD has not been accepted) then how/why are you still bound to them and the TD still in force? It seems like they are now forcing you into sequestration and not any other options (if there are any).
3. If he is forced into sequestration does this mean he will lose his house? Will he be forced to sell the house to pay his creditors then end up paying a mortgage (or whats left of it) and have no house?
4. Does sequestration mean that you are 'blacklisted' for 6 years (is this partly what you meant by "the exact same path as the TD"?). I will google sequestration now and see if that sheds any light on the subject.
5. At this stage do you think Citizen's advice will be able to guide in an alternative direction ( although i suppose that brings me back to 'is there no way out').

Thanks once again for any help/advice
Sisteract

Hi sisteract,

To touch on some of your questions:

One of the reasons that it is advised to stop making direct payments to creditors is that the individual clearly isn't in a position to make the contractual payments or they wouldn't need the Trust Deed in the first instance. The risk is that further credit is used to compensate for this. Another reason is that the Trust Deed firm is going to handle the liason with creditors from that point. Creditors understand this position. It doesn't benefit them as an industry if people struggling to manage their debts continue to take on new credit.

Sequestration would not necessarily result in the loss of a home. Do you know if there is any equity in the property (realistic valuation minus mortgages)? This is a key question as to how the sequestration will affect your brother.

I suspect that by blacklisted you mean his credit record. Sequestration will have a serious effect on his credit rating, as would a Trust Deed. Any event on a credit file remains there for six years.

Morning

Thanks for that.

It's a minefield/can of worms isn't it.

There is no equity on the house. In fact in todays economic climate i believe it's worth less than what he paid for it(app 4-5 years ago).

Hi sisteract
Hope I don't confuse things more by sticking my oar in, but I think you might benefit from a bit of a summary, so here goes:

Once a trust deed is signed it is not cancellable, even if it fails to become protected. I wouldn't think of it as a "scheme" but rather a formal insolvency procedure, governed by various bits of legislation.

If a trust deed fails to achieve protection there are 2 choices:

1) Your brother applies for sequestration (bankruptcy) instead

2) he carries on with the trust deed on an unprotected basis and hopes that the creditors who rejected it do not take further action. At the end of the trust deed your brother should be discharged by those creditors who did not object (acceding creditors), but will probably have to make arrangements to continue to repay the non-acceding creditors until their debts are clear.

In practice, option 1 is usually what happens. This is because sequestration should work the same way as a trust deed (ie contributions from income if available and realisation of any assets) so if someone is willing to sign a trust deed then there is no reason usually that they wouldn't go for the fall-back option of sequestration instead. Also, the unprotected trust deed is usually not a very satisfactory option because the person is still at the mercy of their creditors.

The main reason why someone might opt not to go for sequestration after a trust deed fails to get protected is if their job would be put at risk by doing so (in certain professions/industries you are not allowed to go bankrupt).

Still with me??

If there is no equity in your brother's house then there should be no need for it to be sold. Nothing would be gained to pay to his creditors from doing so, in fact they would get less because of the costs incurred in forcing a sale and the potential shortfall to the mortgage provider having to be included as a debt. That is why a house without equity should normally be entirely safe in a sequestration, just as in a trust deed.

Clear as mud? Thought so

Kevin

Hi again

That has actually made the waters much less muddy,thanks.

However i do have another question though it may be more of a comment.
As i understand it(and as you have said previously) sequestration goes down the same path as a TD. So if that's the case i.e pays the same/similar amount over the same amount of years and i suspect his creditors 'see' the same amount of money paid back to them then why would one of his creditors refuse the TD instead forcing my brother down the sequestration route? It doesn't seem to make sense if the outcome is exactly the same for them(creditors) but a more stigma attached outcome for my brother (or is that the intention?).

Same same but different (as they say in south east asia)

signed: a much less confused Sisteract

Glad to be of service sisteract.

Good question, and I can only guess at the answer really. As you say, creditors shouldn't be any better off from forcing someone into sequestration - and in fact may well get less back as the cost of running a sequestration is usually higher because there are even more formalities involved. Which is why the majority of creditors do not usually object to trust deeds.

However, most creditors do look for a minimum return from a trust deed in order to accept it. I think it is a strategic thing. Because most people would prefer to do a trust deed than be sequestrated, then they might strive to pay that bit more than they would probably have to in a sequestration in order that they can get a trust deed agreed.

I think there may also be one or two creditors who regard trust deeds with suspicion and think that debtors may get off more lightly in a trust deed than they would in a sequestration so do object if they think that this may be the case.

I thought they could only object if more than one third of the total debt was owed to 1 creditor. Has he tried the DAS scheme you can get protected with this by the DAS Administrator.

Hi there

The trust deed fails if objected to by more than 1/3rd in value of total debts or more than 50% number of creditors. Also you can't enter DAS if in a Trust Deed.

Mark

When I signed my trust deed I did it thinking that if it failed to become protected I would go down the DAS route. I'm a bit concerned that this doesn't seem to be an option.

Why is this not possible? Surely it would be more beneficial for the creditors?

Hi aber87.

How much is your trust deed payment? And how much do you owe in total?

The proposal is a payment of £240 per month on a total debt of around £20k.

I'm really not keen on the sequestration route if I can at all avoid it.

Oh god!! I was feeling pretty confident about mine! Signed on 28th may! Feel sick now