Hi Daisy Daisy.

I suppose that may or may not be true for you (depending upon your circumstances) but it certainly isn't a general rule applicable to trust deeds.

The trust deed firm will be looking to cover their fees and costs as well as expecting to pay a certain level of dividend to your creditors (they are guided to only take on cases where they believe at the start that the creditors will receive a 10% return on the debt or more).

I don't think you should be looking at this from the perspective of how much you would have to pay to be able to sign a trust deed.

The question really should be how much can you afford to pay towards your debts after your reasonable expenditure has been covered?
The answer to that question will guide you (and your adviser) towards the options that are available to you.

The other thing to think about is the fees that are being charged by a particular trust deed firm. They vary, sometimes by a lot. That could mean one firm doesn't think a trust deed is an option for you but another does think it would work (because less of your contributions are being taken up by their lower fees meaning your creditors get more).

Another thing that happens frequently is that certain firms propose pretty high fees which mean their clients are asked to do four or five year trust deeds. Sometimes by approaching a different firm with lower fees that longer term can be reduced to the more normal three year term. This will not always be the case, sometimes where a case is quite "tight" even firms with lower fees may need to suggest to a client a longer than three year term if they are certain that a trust deed is the route they wish to take.

Hi Daisy Daisy

No, the monthly payment is based on your income and expenditure.

For the Trust Deed to be accepted, you'll need more than 2/3rds of the total debts to agree. ie if your debt was £30k, you would need £20k+ of creditors to agree.

If you cannot afford a contribution, then bankruptcy may be an option.

Mark

Mark, can you elaborate on 'If you can't afford a contribution' as in another thread it seems to be established that ones contributions in a TD or bankruptcy would be about the same?

Hi Caroline

For a Trust Deed to work, there needs to be a proposal to creditors which they will accept. In bankruptcy there does not.

ie Someone on benefits with no surplus cannot do a Trust Deed, however they can petition for bankruptcy.

Mark

Hi Caroline.

A trust deed requires that you are in a position to make a certain level of contribution each month.

If no contribution is affordable a trust deed will not be an available option.

Bankruptcy will be an available option in this situation as, if contributions aren't affordable, you can still go bankrupt.

Hi Caroline

To expand, there needs to be a regular payment in a Trust Deed which allows for a minimum acceptable dividend to creditors. This will allow the Trust Deed to be accepted.

If, once you have calculated income and expenditure, there is sufficient income left over, then a Trust Deed may be an option. If there is little or insufficient surplus, then bankruptcy may be the better option.

Not sure if this helps.

Mark

So if someone has debt of over 200k with a monthly disposable income of £300 a TD is not an option even if the creditors accepted it, it would have to be sequestration in these circumstances? thanks

I would have thought with debts of that amount £300 wouldn't give enough in fees plus dividend but i may be wrong....

Hi Daisy Daisy.

Lets say you're looking at 36 payments of £300. £10800 would be paid into the trust deed.

For the sake of example we could say that £5000 of this was taken up by the fees and outlays of the Trustee plus VAT.

That leaves £5800 to be distributed to creditors. That's 2.9% of the total debt owed.

The guidance to trust deed firms is that they shouldn't take on a case unless they have a reasonable expectation of returning a dividend of 10% or more to the creditors.

Even if the trust deed ran for five years the dividend would only reach 6.5% in this example.

As such the trust deed doesn't seem to be one that any Trustee would feel able to take on.

Sequestration may therefore be an alternative option to consider in such circumstances.

Excellent thank you. There is so much information out there and many websites offering differing information. However it seems to me unless figures are introduced, it's very difficult to know how to proceed.

Hi TDA and Daisy Daisy,

Spot on. Full creditor details and full income and expenditure would be required to be able to confirm which is best option.

Mark

HI Folks

It seems every answer produces more questions-the benefit of a forum!
My understanding was that available income after expenses was needed and creditors' agreement for a trust deed to be able to become a PTD. This is in agreement with all advice and comment above. I am left tho with the question of paying the IP fees for Bankruptcy. These are not small amounts, typically £7000+ If free income is so low as to make payments to a PTD impossible, how is a Bankruptcy funded? If a creditor meantime chooses to apply for an individual's sequestration, presumably the IP is not paid this fee by the Bankrupt person?

Hi Pamjo.

My understanding is that the Accountant in Bankruptcy outsource much of this work to a panel of insolvency firms (where someone has been made bankrupt by a creditor, or those who have applied directly to the AIB to become bankrupt).

I'd imagine the firms make some cost recovery where contributions can be afforded by the person in sequestration, and that they're paid for their work by the AIB where no cost recovery is possible.

I'm sure one of our experts will be able to clarify this.