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 What if TD proposal is rejected ?

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T O P I C    R E V I E W
InSebtQuestion Posted - 08 May 2018 : 20:49:33

Hi There, have been reading the forum for a while . Haven't needed to post until now, as its very informative.

My partner signed a Trust two weeks ago .
We were quite pragmatic & relaxed after the initial stress, and just presumed it would be accepted and we could start getting on with our lives.

We got ourselves into a mess. ( I have no debt apart from mortgage - long story - but basically .... im a 'saver' , and partner , no so much. )

She was taken through all the legal documents and the advising firm are reputable ( and were recommended by a friend ) .

We took the documents out again over the weekend, she's now terrified the proposal is going to be rejected. The adviser was at pains to point out that its always a possibility; but verbally assured us it was unlikely.

Since signing ; she has stopped making payments on all loans and credit cards. Some of the phone calls and letters have started.

We are now both concerned that the TD may be rejected.

While this is possibly irrational - Can someone please lay out what exactly happens if a TD fails to get protection ?

There is not alot on line about this.

Some online articles suggest the TD continues , in an unprotected state - this would be calamitous for us , as we'd be pursued - while paying a TD with no piece of mind.

Some internet searches suggest - You return to your original situation, perhaps able to re apply with a different practitioner ?

Some suggest DAS .

Some suggest bankruptcy.
bankruptcy would be awful , we have very little equity in our home ( 10 / 15 k ) and no other assets so we;d hate to loose it. it sounds extremely stressful.

Anyway - I realise the general theme of the forum is ' pro trust deed ' and I agree. They seem to have solved lots of problems for people.

I just wondered if anyone can explain or link to the exact situation if we are the small %'age who are rejected?

background -
live in rural village.
home value 185
mtg 171
only wife on TD
debt - region of 43000
10 / 11 debtors.
mix of CC and loans ( high street, pay day / high interest )

Realise its now in the lap of the gods ..... and we have no control over it.

But any advice that might put our mind at ease , or at least help us strategise in the ''unlikly event'' its rejected.

All the best.

7   L A T E S T    R E P L I E S    (Newest First)
Kevin Mapstone Posted - 14 May 2018 : 17:45:56
Hi. Yes, you could potentially be the 3rd party buying out a Trustee's interest in your partner's share of the equity - assuming you have your own income separate to your partner's.
It would also be normal for a trustee in a bankruptcy to allow for what it would cost to force a sale of a property when considering any offer from a third party.
As the others have said though, I think you are likely to have no reason to worry about the Trust deed becoming protected in any case. Fingers crossed!
TDA (Debt Adviser) Posted - 11 May 2018 : 15:03:42
Hi InSebtQuestion,

You can be the third party buying the equity.

The trustee may factor in selling costs when assessing whether equity exists (there's no point in them selling the property if selling costs eat up the profit).

It's worth bearing in mind as well that the valuation may be a little different to that suggested by an estate agent hungry for your business. They're usually based upon selling the home reasonably promptly and efficiently.

If the existing trustee (proposing the trust deed) were to take on the bankruptcy case you can establish with them in advance the valuation and any allowance for selling costs (if it exists) that has been made.
InSebtQuestion Posted - 11 May 2018 : 14:52:05

Thank you TDA - I did that and it was interesting.

Does anyone know,

- If she chooses/is forced etc to go down the bankruptcy road can I ( as her partner ) be the 3rd party who buys the equity ?

- Also - would it generally be half the equity, Or half the equity - minus the potential cost of selling ? This would be very little indeed.

Any held appreciated.
TDA (Debt Adviser) Posted - 09 May 2018 : 12:55:03
Hi again.

With bankruptcy the trustee would be looking to collect in your partner's share of the equity in the property. They'd much rather take a sum of money from a third party rather than force a sale - this is much easier, quicker, and cheaper for all involved.

There would be potential to attempt a trust deed again. The thing to take into account though is that the major consumer credit providers have clear acceptance criteria for trust deeds. If they've rejected one proposal for not fitting those criteria, a further proposal would have to be materially different to the first one to have a reasonable chance of success.

Every insolvency practitioner I know would be advising their client on alternative strategies to deal with the debts if protection wasn't achieved. I can't see that any would attempt to compel continued payments into a trust deed that creditors had rejected.

If you use the forum search function (see above near the "Logout" button) and search on "unprotected" you're likely to find some scenarios that have arisen through the years and which have been discussed here.

It's not that common though, and particularly not where a trustee hasn't advised (in advance) of a particular risk of creditor rejection.
pingpong Posted - 09 May 2018 : 12:52:44
I personally don't think you have too much to worry about.

I might be wrong however, if there was an objection by one lender then it would only be an issue if they were owed the majority of the debt by the sounds of it with 10/11 lenders spread over CC Loans and payday loans it is not a likely scenario. if it were the case it might be as simple as adjusting the contributions slightly to meet their criteria but normally your IP will already know each lenders criteria for acceptance and will build the proposal to suit.

With sequestration the house thing in our case worked out the same as the PTD. if your partner is on the mortgage then her share of the equity will be sought. I think with a PTD this can be done after the 4 years but within a reasonable time frame or paid by a 3rd PTY. Not sure how it works with sequestration though as it was paid in a lump sum at the end by a "3rd PTY" in our case.

if it does not get protected as far as I know you either carry on as you were or look at the alternatives (DAS or sequestration) i don't think you would be forced to keep paying the TD
InSebtQuestion Posted - 09 May 2018 : 12:04:49

Thankyou TDA,
Yes nothing meant by 'Pro Trust Deed', clearly its case by case and from what I've read if it suits its certainly the way to go. This site is extremely helpful and clearly pro '' the right thing '' .

Bankruptcy is certainly something we would want to avoid. But as you say if it ends up being best worst option. . . . we can consider.

re bankruptcy - That's useful to know about the house. From what you've said I guess I / or someone I know might start to plan to have a lump sum to buy my partner ( I call my wife but not official ) out ? although she is on the mortgage. . .

It looks like non 'protected' will lead to a lot of stress and anxiety. Arguably less than continuing on with un affordable debts , but still.

Is there absolutely no scope, having been rejected to have another go at a proposal ? Perhaps with another firm ? more adept at getting the creditors to agree?

The other thing is, she has signed some very strong legal documentation to commit to a monthly payment for four years with the trustee.
If it's unprocted in the end, does insolvency firm ( they are accountants ) have the right to push us to continue with an ' unprotected ' Trust deed ?

I have every confidence that it will get protection .... but I guess I have every confidence I will not get burgled. . .. I will still get home insurance and worry/plan a little!

Is there any case study's of people who have been rejected and the course of action they took?

Sorry for the questions. Getting way ahead of ourselves i know.

I had researched significantly before she applied for the TD - but we have not until now properly considered non protection scenarios.


TDA (Debt Adviser) Posted - 09 May 2018 : 09:14:04
Welcome to the forum InSebtQuestion.

I wouldn't really say that this site is "pro trust deed". It's really pro people resolving their debt problems, with a trust deed being just one of the options that could be appropriate. You'll find lots of threads around the forum where we've pointed people towards alternative options even if they apparently qualify for a trust deed.

If a trust deed fails to become protected most people will choose to enter into a different kind of debt solution. Most commonly that would be sequestration (bankruptcy) or a debt arrangement scheme (DAS). Each of these solutions could provide protection from creditors which, as you state, would not be provided by an unprotected trust deed.

Bankruptcy would not necessarily be catastrophic. Taking a home would be a last resort. If there was a little equity a third party could pay over this sum rather than the property being sold. If there was no equity there's no point in selling the home usually. There's no getting around the fact that bankruptcy is more tricky for homeowners though.

The major lenders have well understood acceptance criteria for trust deeds, so your advisers should have been able to spot any significant risks of your partner's proposal being rejected and advise you accordingly. If you've had no such advice it's a fair assumption that the provider doesn't perceive any significant risk of this happening (because the proposal meets lender acceptance criteria).

I do hope that this information is useful and/or reassuring. It's pretty unlikely that the trust deed will not become protected, but it's also always wise to consider all of the possibilities and to have a back-up plan.

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