I thought it may be useful to share and summarise the minutes form the recent Protected Trust Deed Standing Committee meeting held on the 22 June 2016.

You can find the full minutes on the AIB website under About AIB > Managing the business > Corporate Governance > Protected Trust Deed Standing Committee.

For those that are not aware, the PTD Standing Committee is chaired by the AIB and comprises of members from the creditor, insolvency practitioner, debt advice sectors as well as recognised professional bodies.

The purpose of the protected trust deed (PTD) standing committee is to:
ÔÇó Provide information and guidance to the Accountant in Bankruptcy (AiB) on the administration of protected trust deeds
ÔÇó Help to identify problems/issues or general areas of concern arising from the administration of PTDs at an early stage
ÔÇó Act as a discussion forum for stakeholders, to ensure that there is an effective conduit for the receipt and dissemination of information concerning PTDs across stakeholder groups and interested parties.

I have summarized the parts which I think might be of interest to people. It is a little bit of reading but it think it demonstrates that all organisations involved in debt advice try to communicate how things work from both sides.

Common Financial Tool (CFT)

The majority of respondents agreed that the CFT is an effective way to ensure transparency and calculate the level of contribution made by a debtor. There were concerns raised about:

ÔÇó the CFT's inability to deal with income that fluctuates;
ÔÇó the level of evidence needed being too onerous; and
ÔÇó expenditure being over estimated, up to the allowable trigger figure level.

A suggestion was made that, in order to incentivise debtors to work overtime, a formula should be applied to ensure that the full overtime wage is not calculated within a contribution. This would allow additional funds to be ingathered for the benefit of creditors and not discourage debtors from working overtime, if it was available.

AiB ÔÇô authority to refuse to grant a trust deed protected status

The initial key findings indicated that most respondents agreed that AiB should have authority to refuse to protect a trust deed where contributions have not been assessed using the CFT. Some said that as the trust deed is an agreement between parties, AiB should have no locus to intervene if creditors are content.

There was a range of additional reasons given why AiB should not protect, which include:

ÔÇó if equity was not being dealt with ÔÇÿproperly',
ÔÇó where equity outweighs debt; or
ÔÇó if the debtor has acquired significant debt in the last 6 months.

There was also a suggestion that a ÔÇÿfair and reasonable' test could be introduced for trust deed proposals.

Treatment of equity

People were split on whether legislation has adequately addressed how to treat equity. Some said that the legislation should be adequate but that the procedure is open to abuse. One said that the equity being realised is too low and that clearer guidance is needed. Respondents were also split on whether a PTD is right for a debtor when they have assets which exceed the level of debt.

Some suggestions included:

ÔÇó making Form 1B mandatory; and
ÔÇó directing trustees to use existing legislation introduced through the Home Owner and Debtor Protection Act.

Equity Rich PTDs

AiB feel that there is a lack of transparency in the proposals that are being sent to creditors with regards to the treatment of equity in trust deeds. FC has prepared a ÔÇÿDear Trustee' letter, explaining the Accountant's views on this practice, which has been sent to RPBs for review prior to publication. Responses have been received and the ÔÇÿDear Trustee' letter will be published shortly.

EM suggested that creditors should be allowed to vote on any agreement regarding heritable property. She also believes that trustees should use the specific legislation to allow for the exclusion of heritable property from a trust deed.

JC sought opinions on PTDs being granted, to protect equity, where it would appear that DAS was a more appropriate debt relief product. DM commented on the fact that only those registered as DAS approved money advisers could offer a DAS Debt Payment Programme to debtors. He suggested that there should be a wider policy review about how equity should be dealt with across all Scottish debt relief products. JC also highlighted that creditors can vote against the protection of a trust deed.

Re-appointment of Trustees in concluded PTDs

A date has been set for a hearing in the Inner House of the Court of Session, in respect of an appeal against an application to re-appoint a trustee in a concluded PTD. This hearing has been set for 12 and 13 July 2016.

CS asked if there was anything creditors could be doing in relation to this process. JC confirmed that there were a number of things that impact on this process, such as some Sheriffs not re-appointing trustees, in sequestrations as well as PTDs. With regards to applications to re-appoint trustees in sequestrations, some Sheriffs require the application to be made with the agreement of creditors who are owed money.

Contributions from debtor's salary

MH raised a point for discussion regarding assignations of salary, in respect of PTDs granted prior to 28/11/2013. This related to the practice of trustees registering their PTDs in the Books of Council and Session. When a debtor failed to make payments, as agreed, the trustee would try to enforce the payment as a debt and have it deducted from the debtors salary like a wages arrestment.

In 2 instances that MH is aware of, the debtor advised that the trustee did not take a change of circumstances into account and this resulted in financial hardship for the debtor.

EM explained that registering the trust deed in the Books of Council and Session has a similar effect to that of a decree; allowing the trustee to enforce recovery in the event of non-payment.

DM pointed out that if the trustee had not taken the change of circumstances into consideration, the debtor could seek a direction from the Sheriff, however, he accepted that this would be a cost to the debtor.

It was agreed that in such circumstances, this should be brought to the attention of the Trust Deeds team, who could undertake a PTD review and AiB could seek a direction from the Sheriff, if required.