Scottish Trust Deed

A question about : Scottish Trust Deed

Hi folks,

I have the following debt with the creditors below:
Egg Loan Ј2467.00
Liverpool Victoria Ј8000
Lloyds TSB Ј17600.00
RBS Ј8000
Bank of Scotland C/C Ј1000
Sky Credt Card Ј2400
Bank of Scotland O/D Ј1700.00
= Ј41167.00

Mortgage Redemption Figure: Ј71000 approx
Valuation Estimate between Ј77k

Approx equity: Ј3500.00 once solicitors fees etc taken off.

At the moment I am using the CCCS and have a DMP set up and paying Ј300.00 per month and have come to the conclusion with the help of the CCCS that I am never going to be able to pay all this debt back through a DMP as some of the creditors are still charging interest.

I would like to go down the road of a Scottish Trust Deed and have had an initial meeting with KPMG in Glasgow (Very Helpful, recommended by CCCS)

The advisor at KPMG went through the details of the Trust Deed and advised me that as I have a mortgage I would need to release the equity in my home as a condition of the Trust Deed - KPMG are arranging for a surveryor to come out to the property to get a valuation done.

Once the valutation is done the advisor at KPMG said that the difference between the valuation and the mortgage redemption figure would equal the equity and would need to be paid either at the beginning of the trust deed or at the end.

Can I just ask how others view the idea of a trust deed based on my situation and any other comments you have.

Thanks.

Best answers:

• There's not much info on trust deeds on this board - mostly IVA's which are the English equivalent. Might be worth looking at some of the IVA threads to see if there are similar queries.
  Have you asked KPMG what happens at the end of the TD if the market has changed and there is no equity in the house by that time? (Just curious as to the answer)
• also ask whats happens if you can't remortgage to raise the money....
• What heppens in the trust deed situation if the house is in joint names and the partner is not involved in the debt?
• Hi kev - whilst I hold CCCS in the highest esteem, I think that you may benefit from a second opinion, on this one.
  Try National Debtline on 0808 808 4000 www.nationaldebtline.co.uk/scotland
  or your local CAB.
  Recent changes in Scottish Insolvency Laws, particularily in regard to bankruptcy, may mean that your options are a bit wider than you currently think, but you really do need professional advice.
  I would be wary about entering into any contract which was dependent on 'raising equity' after three years. This is quite commonplace with the English 'IVA factories' and can result in enforced bankruptcy if the 'debtor' is unable to meet the IVA requirements.
  I have no doubt that KPMG are any less than professional - especially if they have been reccomened by CCCS - an I do not, for one second, wish to infer that they are like the 'IVA Factories' in their approach to debtors. Equally, I am not 'au fait' with the new Scottish regulations, which is why I suggest that a 'second opinion' will do no harm.
  Good luck
• Hiya
  I'm not sure if you went to KPMG to discuss all of your options, or if you specifically asked about a Trust Deed. If you asked about all of your options, they should have told you about the Scottish Debt Arrangement Scheme, which is effectively like a DMP, but your creditors HAVE to freeze all interest fees and charges, and they are written off when you complete the payment programme. And while you're in a payment programme under DAS they can't - by law - make you pay any more than you've agreed to pay. Your home will be protected.
  I have a very negative view of Trust Deeds. And the poster I'm about to link to had a very negative experience. However, several thousand trust deeds are signed each year, so I guess they do work for some people. Please bear that in mind as much as my own negativity! Here's one person's experience:
  https://forums.moneysavingexpert.com/...5#post13425025
  The new Trust Deed regulations say that the trustee, and the debtor have to sign a statement saying that the debtor has been told - among other things - that granting a trust deed may mean that their house may be sold or they may have to move home. I hope KPMG have done so.
  If you decide to enter the trust deed, I would strongly recommend that you get KPMG's assurances about the equity in writing, and take independent legal advice on those assurances before signing the trust deed.
  If you have property you wouldn't be eligible for bankruptcy under the Low Income Low Asset route. And if you're in a DMP, you probably don't have any proof of apparent insolvency either. But, I guess that if you're looking at a Trust Deed, you're hoping to avoid bankruptcy? (sorry for the assumption, but it regularly comes up as a reason why people opt for a trust deed)
  I would echo rog2's advice to seek a second opinion, and really can't urge you strongly enough to speak to a local authority or CAB money adviser - preferably one who is DAS approved. From the figures you've given you could do a DAS programme over 11 and a half years. It's just outside the informal 'upper limit' of 10 years - but the law itself doesn't put any limits on DAS.
  Good luck!
• The main thing I have to do is insist or make sure that what ever figure of equity is given prior to signing the trust deed is written down and agreed not to change.
  To give you some idea of where i'm at with the whole process please read below:
  On Wednesday between 10am and 12pm KPMG have arranged for a surveyor to come down to my flat to put a value on it... I rekon its worth between £75k and £77k
  I've spoke with Halifax to get my mortgage redemption figure and they have supplied me with it - £71,399.00
  KPMG state that to work out the equity you have to take the valuation away from the redemption figure plus what reasonable costs would normally be inccured in selling a house in this case they state its around £2500.00
  So lets say worse case scenario the surveryor comes down on Wednesday and tells me my flat is worth £77k
  Value of property £77,000
  Redemption Figure £71,399
  What would be reasonable selling costs £2,500
  = £3101.00 equity to find at the end of the three year trust deed.
  Does anyone agree or disagree with anything above??
• Further Update......
  Have spoke to KPMG today - Very helpful!
  I have been advised that the equity figure agreed at the start of the trust deed does not change, it gets frozen and remains frozen for the entire term of the trust deed.
  In England where they have an IVA the value of any property does get the revalued at the end of the IVA - This is where the Scottish Trust Deed is better as the figure of equity is frozen at the outset.
  At the end of the trust deed so long as i have co-operated fully and have made all my monthly payments including the equity amount after the 36 months my outstanding debt is written off.
  KPMG will only re value the property at the end of the trust deed if I fail to co-operate with them or refuse to make payments etc.... Also please note that not co-operating and not being able to pay should you lose your job are two different things.
  All in all this is looking very promising, just hope my flat isn't worth more than i think as I want to keep my equity low for the purposes of the trust deed.
  If anyone is thinking of a trust deed i do recommend you speak to KPMG - A very professional company and are fully recommended by CCCS and Payplan.
  I'll keep you all up to date with how things go.
• Just out of curiosity, surely KPMG have substantial fees, as one of the big four.
• Just bumping back to the top for any further comments or advice.
  Thanks
• I strongly recommend that you double check the equity situation again.
  I know of people who had to raise funds at the end of TD due to rise in equity.
  As has been said please get other advice from a money adviser.
• I would certainly hold fire and see what CCCS have to say. At the present time everythig is up in the air with regards to house prices. At the moment Scotland hasn't experiences any great falls but IMO we are not immune and falls will happen. At the end of the three years you will be expected to produce the total of equity in your property that KPMG say you have based on todays valuation. If at the end of the trust deed you home is only worth say 70k and the redemption figure is still 71k where will you get the money from?? Would this mean the trustdeed would fail and you would be made bankrupt and your home sold despite paying ЈЈЈЈ over to KPMG over the previous 36 months??
  Out of interest what are KPMG saying you monthly payments will be?? Also how stable is your job baring in mind the current financial uncertainty.
• Hiya Kev
  I can only echo and repeat the advice given - that you get a second opinion from the independent free advice sector: CAB, local authority money advice, National Debtline etc.
  I know that Trust Deeds are different from English IVAs - and I know nothing about IVAs . Everything I have said has been based on my knowledge of Scottish Trust Deeds. So, it's not a case that I'm confusing the two.
  As far as I can see, there is nothing in the Trust Deed regulations about when equity is looked at/agreed. The Accountant in Bankruptcy's guidance recommends that it is dealt with early in the Trust Deed, but says that it can be done later. I have certainly read of cases where people have been convinced that the equity issue had been dealt with at the beginning of the TD, but were then asked to pay more at the end. And in some cases found that their TD ran on for longer than 3 years.
  As people have already said, if you want to go for the TD option, get the assurances about equity in writing - and in plain English. It would do no harm to ask them for a copy of the relevant part of the legislation ;-)
  As said before, the legislation does lay down some very specific things that the trustee MUST do before you sign a Trust Deed. These include telling you about alternatives to a Trust Deed - which include a DMP, or the Debt Arrangement Scheme (which is legally binding on creditors, and obliges them to freeze interest, among other things). They also have to make you aware of the potential consequences of signing a Trust Deed (as set out in my earlier post). And they have to give you a copy of the Scottish Government's Debt Advice & Information Package (it's a small leaflet, lol!!).
  They have to do this, by law. If they haven't done so, but are giving you assurances on equity - which don't seem to come from the legislation - then you may have to ask them some direct questions about these things.
  I would also expect them to discuss with you what would happen if the Trust Deed fails to become protected. A TD is a form of personal insolvency. If it fails to become protected, that is proof of 'apparent insolvency', which can be used by you, or your creditors, as grounds for making you bankrupt.
  All of which brings us back to the original recommendations that you get a second opinion from another organisation in the (Scottish) voluntary advice sector.
  Good luck!
• Thanks for all the comments and replies.
  I spoke with KPMG regarding what would happen should my property fall in value after the 3 years and the agreed amount of equity set at the beginning of trust deed could not be raised.
  I was advised that as it was leaglly binding I would still have to come up with the money although the advisor said that he has never known this to happen.
  I'm going to speak with the CCCS on 02 October 2008 when i'm getting my DMP review and see what they suggest re the trust deed so will hold off signing anything until then.
  I also thought about going down the DAS Debt Arrangement Scheme.. Has anyone signed up to this and how is it going?
  Thanks
• further update...
  Have spoke with Stirling Council this morning on the telephone and now have an appointment booked to see the money advisor who deals with DAS: Debt Arrangement Scheme on Tuesday 14 October.
  This will give me a better choice of options to go down regarding my debt and should I go down the DAS route it will protect my house unlike the Trust Deed scheme.
  Keep you all posted