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DW2015
Contributor

8 Posts

Posted - 22 October 2019 :  21:55:01  Show Profile  Reply with Quote
Hi all.

Worried newbie here. Think my debt is just about to tip over the edge and I'm unsure what to do about it.

I have unsecured debt of around £50k but I've been paying everything on time and have no arrears anywhere.
My only problem is that I've been borrowing from Peter to pay Paul and I'm at a point where there's no more borrowing left.

We own our house. We purchased it through the government help to buy scheme so government own first 15% of the sale.
From my calculations we have roughly £15-20k equity in the property after the government deduction.
House worth ballpark £185k and £135k left on the mortgage.
This is a joint mortgage with me and my wife. All of the debt is in my name though.
I'm not sure what impact, if any, the government involvement has.

I lease a vehicle so do not own one.

I have a salary of just over £50k per year and a bankruptcy would have an impact on future job opportunities given the sector that I work in.

I've read a lot of information regarding secured loans, DAS and TDs but I think that a secured loan is the wrong option.

To be honest I'm slightly scared as I've never had to do anything like this before.

Would greatly appreciate any advice that anyone can give me.

DW2015
Contributor

8 Posts

Posted - 22 October 2019 :  22:25:24  Show Profile  Reply with Quote
Sorry. One thing I should have added is that roughly £30k of my debt is with Nationwide. They are by far the majority creditor. Next up is Barclays with £10k and the rest are smaller amounts with various other creditors.

I also bank with Nationwide which I assume is not a good idea if things are going tits up.

Edited by - DW2015 on 22 October 2019 22:37:50
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 22 October 2019 :  23:18:02  Show Profile  Reply with Quote
Hi DW2015 and welcome to the forum.

Firstly well done on reaching out for help and advice to deal with the £50,000 of unsecured debts. Itís often the hardest step to take but once you do there is plenty of support and advice on here for you.

The positive thing is that you do have options to deal with the debts itís just working out which option best suits your circumstances.

When it comes to a Trust Deed we need to calculate your share of the equity in the property. Itís easy and straight forward to do this even with the shared equity. We simply value the house, deduct off the % that the government has and then the mortgage and this gives us the total equity and then we split this 50/50 between you and your wife. On a Trust Deed if you have equity then a reasonable proportion of this needs to be paid into the Trust Deed for the benefit of the creditors. This could be a third party such as your wife making monthly payments for 4 or 5 years.

If it looks like there is too much equity or you are worried about the house etc. then a DAS could be a more suitable option. Based on the £50,000 of debts and if you used a non fee charging organisation for this then over 10 years the payment would be approx £420 per month.

You need to be careful about secured loans in terms of taking unsecured debts and securing them against your house. Also the level of interest and how much you would pay back in total. Also it doesnít look like you have enough equity to clear the full 50k via this route so you would still have debt left over.

A lot will come down to your affordability and how much you can comfortably afford to pay per month and how much equity your property has. Itís important to go over a thorough budget to work out an affordable payment with an Expert.

Everyone at this stage always feels scared and worried but once they have spoken to an Expert about your options and gone through it all you will start to feel better. I along with the other Experts on the forum would be able to help you with some one to one advice if you wanted.

As you bank with Nationwide Iíd recommend opening a new account with a bank you have no debt with. Stay away from Halifax/Bank of Scotland as they can be problematic to deal with. Normally I recommend Nationwide or Barclays but you have debt with them. The Co-Op have a basic cashminder account which is good.

As your car is a lease there wonít be any issues with that.


David is not currently posting in the Trust-Deed.co.uk forum
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 22 October 2019 :  23:23:19  Show Profile  Reply with Quote
Sorry I forgot to ask, I know you say all the unsecured debt is in your name but do you have a joint bank account with your wife? Also is she aware of the debts?

Reason I ask is if she isnít aware and you have a joint bank account changing accounts can sometimes lead to questions from the other person.

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DW2015
Contributor

8 Posts

Posted - 23 October 2019 :  00:13:40  Show Profile  Reply with Quote
quote:
[i]Originally posted by David Tannock[/i]
[br]Sorry I forgot to ask, I know you say all the unsecured debt is in your name but do you have a joint bank account with your wife? Also is she aware of the debts?

Reason I ask is if she isnít aware and you have a joint bank account changing accounts can sometimes lead to questions from the other person.



Thanks for the speedy response David.

No joint bank account with the wife. Only financial link is the mortgage. At the moment she's not aware of my plans but I will be letting her know once I've sorted everything.

Given what you have advised I would have between £7.5-10k equity in the house.
I'm assuming that the house would be safe if I were to go down the TD route?
I'm concerned what impact the TD may have with my employer though.

My biggest worry about all of this is the impact it may have if we were to lose the house.

I think I could safely pay between £500-600 per month towards a DAS so that's also definitely an option.
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 23 October 2019 :  07:27:17  Show Profile  Reply with Quote
Hi DW2015,

If the equity is around those sorts of figures then a Trust Deed is certainly an option for you to consider. As long as the equity was paid over into the Trust Deed then there would be absolutely no risk of losing the house so donít worry about that.

Peoples properties are only at risk if they canít maintain the payments to the Trust Deed which is why itís important to ensure that the Trust Deed is set up correctly and the payment sustainable and affordable.

As I said in my other post when it comes to the equity this can either be paid Into the Trust Deed via a third party making monthly payments over 4 or 5 years or by you extending the Trust Deed at the end of the 4 years to pay over your share of the equity.

What line of work are you in? For the majority of people they can enter into a Trust Deed without it impacting their job. Iíve recently helped a client with a Trust Deed who works for a high street bank and their HR team confirmed it was ok to enter into one.

If you have the ability to pay £500 a month to a DAS then this could clear the debts in approx 8.5 years. What you need to balance up is that £500 a month for over 8 years is a long time and things / lifeís can change. A Trust Deed over 4 or 5 years as long as your job is safe could be a better option to allow you to repay what you can afford and move on with life.

Are you at the point now of beginning to struggle to make all the monthly payments to the debts?

David is not currently posting in the Trust-Deed.co.uk forum
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DW2015
Contributor

8 Posts

Posted - 23 October 2019 :  09:27:35  Show Profile  Reply with Quote
quote:
[i]Originally posted by David Tannock[/i]
[br]Hi DW2015,

If the equity is around those sorts of figures then a Trust Deed is certainly an option for you to consider. As long as the equity was paid over into the Trust Deed then there would be absolutely no risk of losing the house so donít worry about that.

Peoples properties are only at risk if they canít maintain the payments to the Trust Deed which is why itís important to ensure that the Trust Deed is set up correctly and the payment sustainable and affordable.

As I said in my other post when it comes to the equity this can either be paid Into the Trust Deed via a third party making monthly payments over 4 or 5 years or by you extending the Trust Deed at the end of the 4 years to pay over your share of the equity.

What line of work are you in? For the majority of people they can enter into a Trust Deed without it impacting their job. Iíve recently helped a client with a Trust Deed who works for a high street bank and their HR team confirmed it was ok to enter into one.

If you have the ability to pay £500 a month to a DAS then this could clear the debts in approx 8.5 years. What you need to balance up is that £500 a month for over 8 years is a long time and things / lifeís can change. A Trust Deed over 4 or 5 years as long as your job is safe could be a better option to allow you to repay what you can afford and move on with life.

Are you at the point now of beginning to struggle to make all the monthly payments to the debts?




Thanks for that David.
I work in finance so that's helpful.

I suspect this month may be the first where if I pay all of my outgoings I have nothing left and no access to further credit so yes, I'm unsure if I can make all my outgoings this month.
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 23 October 2019 :  10:10:30  Show Profile  Reply with Quote
Hi DW2015,

If you are at the point that you donít think you can make the debt payments this month then itís a good idea to reach out to an Expert for some one to one advice. Missing payments will result in the start of phone calls from the creditors to ask why you havenít paid them and we want to try and keep this to a minimum for you. Do you have any pay day loans?

In the space of a 20 minute phone call we can cover quite a lot, go over an income and expenditure to see what you can reasonably afford to pay and from that we can start working towards which plan best suits your circumstances. In relation to a payment per month of £500-£600 in my experience everyone always starts off with a high payment in their mind but when we go over a thorough budget this might come down. As Iíve said we want any payment you do pay to a plan to be affordable and sustainable so a thorough budget is key.

How do you work your bills for the household i.e. mortgage, council tax, utilities etc., do you pay some things and your wife pays some?

In terms of people that work in the financial services sector we always advise them to check their contract of employment and even reach out to their HR department to confirm things. I do deal with people that work in the finance sector and employers attitudes towards things like debt and a Trust Deed is starting to relax. If you are worried about speaking with your employer to double check you could always do it anonymously on the basis that you are seeking advice for someone in your department.

To consider a Trust Deed you will need to obtain a settlement figure for your mortgage. A quick phone call to the mortgage company and they could confirm this over the phone but you will also need this in writing so ask for it to be posted out. You will also need to get confirmation of the % share that the Scottish government have over your house. An email from them to confirm this is fine. Once we have this we can work out the exact amount of equity.

David is not currently posting in the Trust-Deed.co.uk forum
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DW2015
Contributor

8 Posts

Posted - 23 October 2019 :  14:28:07  Show Profile  Reply with Quote
Thanks David. You've been a great help.

Can you just confirm what you mean by putting mortgage equity in to the trust deed? What does this actually mean?

Sorry if it's an obvious one.
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 23 October 2019 :  15:03:51  Show Profile  Reply with Quote
You are welcome.

Iím a little confused myself by your question about mortgage equity.

In a Trust Deed if you have equity you need to organise for a reasonable proportion of this to be paid into the Trust Deed for the benefit of creditors.

When it comes to your mortgage we need a settlement figure to enable us to calculate the equity that will need to be paid into the Trust Deed. Your current mortgage wonít be impacted by entering into the Trust Deed.

Does that answer your question? Reading this whilst sitting on the train on my phone isnít the easiest. If not let me know what you mean and Iíll try and answer it.

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TDA (Debt Adviser)
Trust Deed Expert



13967 Posts

Posted - 23 October 2019 :  15:11:27  Show Profile  Reply with Quote
Hi DW2015.

If you haven't seen it already, this page on our site might be useful:

https://www.trust-deed.co.uk/equity-homeowner-house.html

It explains some of the possible scenarios related to equity (including when there is little equity).

Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds    
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 23 October 2019 :  18:50:52  Show Profile  Reply with Quote
Thatís a really good page TDA! Very useful.

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DW2015
Contributor

8 Posts

Posted - 23 October 2019 :  22:35:28  Show Profile  Reply with Quote
quote:
[i]Originally posted by David Tannock[/i]
[br]You are welcome.

Iím a little confused myself by your question about mortgage equity.

In a Trust Deed if you have equity you need to organise for a reasonable proportion of this to be paid into the Trust Deed for the benefit of creditors.

When it comes to your mortgage we need a settlement figure to enable us to calculate the equity that will need to be paid into the Trust Deed. Your current mortgage wonít be impacted by entering into the Trust Deed.

Does that answer your question? Reading this whilst sitting on the train on my phone isnít the easiest. If not let me know what you mean and Iíll try and answer it.




Thanks David.

Does this mean that the equity sits with the trustee until the trust deed is complete?
Once trust deed is complete then equity is returned?

Apologies if this is a stupid question. I'm just not sure how all of this works.
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Paul McDougall
Trust Deed Expert



156 Posts

Posted - 24 October 2019 :  08:53:11  Show Profile  Reply with Quote
DW2015

When you enter into a trust deed, your assets are conveyed to your trustee and an agreement is proposed to creditors.

If you have equity within the property then this could be dealt with via an extension of payments.

Once the agreement has been fulfilled and all payments made, the trustee will then relinquish their interest in your property and will re-convey the property back to you.

I know it sounds daunting however the legislation surrounding trust deeds is aimed to give you the maximum protection possible. Your trustee may request a Form 1B to be completed and signed which is a contract in respect of any agreement for your property clearly setting out how the property will be dealt with.

The only way this can be nullified is if you decide to sell the property or do not stick to your end of the agreement as outlined to creditors.

Hope this helps.

Recommended Partner & Trust Deed Expert - Ask me for help setting up a Scottish Trust Deed    
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TDA (Debt Adviser)
Trust Deed Expert



13967 Posts

Posted - 24 October 2019 :  08:54:40  Show Profile  Reply with Quote
Good morning DW2015.

Before your trust deed begins, a plan is put in writing with regard to the assets you own at that point in time.

An example might be, if there were a modest amount of equity in a home, that you agree that an extra six monthly payments will be made at the end of the usual four year term. An alternative in this scenario might be that a third party (usually a relative) will make a payment to the trustee "in lieu" of this equity.

An example might also be, if there were little or zero equity in a home, that it's documented that no extra payment would be required.

Once you complete your obligations (monthly payments from income, plus any payment due in lieu of assets) you can be discharged from the trust deed. The trustee ceases to have any interest in any assets that have been dealt with according to the plan that was agreed at the start.

Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds    
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David Tannock
Trust Deed Expert



2383 Posts

Posted - 24 October 2019 :  08:55:35  Show Profile  Reply with Quote
In a Trust Deed if you have equity in the property then this needs to be paid into the Trust Deed for the benefit of the creditors. The equity is then paid to the creditors at the end of the Trust Deed. You donít get this back.

For example, if you have £10,000 of equity in the property then this needs to be paid into the Trust Deed. Your wife could pay this in by making monthly payments over 4 or 5 years. Over 4 years this would be a payment of £208 per month. When it comes to paying over the equity you donít top up your mortgage or borrow money against the house.

In addition to that if you are working and can afford to make a monthly payment you are required to pay a payment for 48 months on top of the payment for the equity.

Imagine I owed you £50,000. You would want as much of this back as possible and if you knew I was working you would want to know my income and expenditure to see if I could afford to pay a payment per month. Also if you knew I owed a house you would ask me about this and how much equity I had and you would want some of this to get as much of your £50,000 back as possible.

Have you managed to look into opening up a new bank account?

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