One of the most worrying aspects for anyone considering entering a debt solution is what happens to their assets. You may have spent a lifetime building your assets and made great sacrifices along the way, only to see debt and finally it gets taken away.
Until recently, the Protected Trust Deed (Scotland) Regulations 2008 laid out a number of requirements that had to be met before a trust deed could become protected, that is your agreement achieves legal status and creditors are prevented from making payment demands of you.
One requirement was that all of your assets – your estate – must be handed over to your Trustee for valuation, sale and distribution to creditors. Essential household goods were excluded, but your car wasn’t if you owned it outright and it was above a certain value (you’d be asked to buy a cheaper model), and unfortunately your property wasn’t excluded either, even if it was in negative equity.
In the latter case a trustee would assess the value of your home (and any other properties), get a redemption figure from your mortgage or any loans that you have secured on it, and you would probably have to remortgage or sell up so the equity could be released to the creditors.
One of the biggest sticking points of Protected Trust Deeds has always been this – how insecure and worried it makes people when their home – the bedrock of family life – is included in the arrangement. It has put off many thousands of people entering into the debt solution over the years, many of whom could have been helped, but weren’t.
There were of course options that would allow you to stay in your home. A third party – a spouse or a family member – could make a contribution to your estate to the value of the equity or you could remortgage at the end of the Protected Trust Deed’s term.
This of course depended on whether you co-owned your property with someone else and whether they gave their consent for the property to be valued or part of the arrangement. In some circumstances, if they refused a Trustee would have to go to court and force the sale.
As if all of these pressures were not enough, the economic downturn created new pressures of its own. Apart from difficulties arising with paying a mortgage, when equity is reduced by falling house prices there is less money to be released plus the credit crunch has made it more difficult to access new loans at reasonable rates of interest so equity can be released.
And if the house has to be sold…well…it was going to be a long wait. That’s assuming that your property had equity – if you were in negative equity you could not sell with the lender’s permission and accepting yet more debt in the form of a shortfall.
All of these things combined meant that people who would have benefited from having a Trust Deed decided against them or had their proposals rejected by creditors. More people were being sequestered than ever before.
Something had to change… In 2010 it finally did.
Changes To The Law
The Bankruptcy (Scotland) Act 1985 was amended on 15 November 2010 to allow the exclusion of a debtor’s main residence from their Protected Trust Deed as long as secured creditors agreed not to claim for any debt under the arrangement.
It aims to reduce the homelessness caused by families being made to sell their home to release equity; to contribute to the economic recovery by reducing the costs associated with the emergency housing of families, and create a wealthier and fairer Scotland.
It’s only been a few weeks but already it appears to be providing the reassurance people in debt need to take out Protected Trust Deeds safe in knowledge they can keep their home.
You can find more information on the new Trust Deed laws here.
But the expensive car will still have to go!
Unfortunately, if you have an expensive car that you own outright you will have to downgrade to a cheaper model as there is no provision under the new amendments to exclude these from your Protected Trust Deed. But your biggest comfort, your home, will still be your own.
Free Help And Debt Advice
If you are considering the Protected Trust Deed solution why not talk to one of our experienced advisors free on 0800 193 1024. We can give you free impartial debt advice on how to get out of debt effectively. Alternatively, use our Free Online Calculator to see if you qualify and we will help you.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
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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