Can Your Home Be Legally Taken Away By A Trust Deed?
The laws which govern the treatment of assets under a Trust Deed were – until recently – quite restrictive. ALL of your assets had to be given to a Trustee, usually an Insolvency Practitioner, for valuation and sale if you wanted to obtain Protected status on your Trust Deed and prevent your creditors from sequestering you. That included your home, and you would be required to either remortgage to release the equity or sell the property. It was possible for you to stay in your home if the Trustee was willing to consider other arrangements, such as a family member of third party paying a lump sum equivalent to the equity so the Trustee will forgo their interest in the property. If this wasn’t possible, the Mortgage to Rent scheme could help you remain in your home.
But suppose your home had a little equity, and after all the sales costs were taken into account would yield very little to the creditors? Under the rules a trustee would have still been required to sell it. This was the position that many people found themselves in, and it led to some refusing to leave their homes under such circumstances. In addition, some had bought their homes with former partners and friends, who were in turn understandably annoyed at the possibility of losing their asset to release so little value to the creditors and refused to allow the sale or re-mortgage.
To try and break the deadlock, some Trustees would take court action to force the sale. Before they did so however, without the consent of the owners of the home the Trustees had to obtain either permission of the area’s Sheriff.
It is a very rare occurrence for a trustee to ask a Sheriff to step in and grant them permission to sell the debtor’s home, as a compromise can usually be found between the house occupants and the Trustees long before this. However when it does happen the sheriff it is by no means done deal that you will lose your home. The Sheriff has to spend some time considering the circumstances surrounding the case and take into consideration the needs and financial resources of everyone involved except the debtor. If it would cause considerable hardship to the spouse, civil partner, former spouse or former civil partner they may decide against it. Additionally, the length of time the occupants have been living in the house and the interests of the creditors will be considered.
The Sheriff can do one of three things. They can;
a) Refuse the application
b) Grant the application but postpone action for up to 12 months or
c) Grant the application and allow the Trustee to sell the home, although they can stipulate certain conditions must be met.
With the recession and the credit crunch it became apparent that too many homes were being forced to sale and its occupants made homeless for what amounted to little money for creditors. Those occupants would have to be housed by the local councils and the knock on effects, both physical and mental, to the adults and children concerned was immense.
In November 2010, the Scottish Government tackled this problem head on and introduced almost 50 amendments to existing legislation, including:
- A debtor’s home to be excluded from a Protected Trust Deed where it is of little value to creditors as long providing it has a mortgage or secured loan against it and the secured creditor agrees in advance not to claim under the Protected Trust Deed.
- A change in definition of property that can be excluded. Formerly this was “family home”; this has changed to “debtor’s dwellinghouse”, which means that single people can now benefit from the changes while simultaneously excluding those people who live in a property which is owned but not occupied by the debtor.
- The Sheriff can now postpone action to sell a home for up to four years as oppose to the previous limit of 12 months. This allows, for example, a child to complete schooling.
These three amendments alone are set to make a huge difference to thousands more people whose lives will be changed forever by having a Protected Trust Deed. Finally, they can look forward to a debt-free future, safe and secure in their own home.
See here for more information; New laws regarding Protected Trust Deeds
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
|3||Credit card 2||£4,092|
|4||Credit card 3||£5,399|
|4||Credit card 4||£5,200|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
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