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KeitherReeve
New Member

6 Posts

Posted - 08 January 2020 :  12:01:41  Show Profile  Reply with Quote
Hi, I am new here and getting a bit desperate. I have considerable debts but my income would let me pay it all off over a longer period of time (say 6 or 7 years), however a large proportion of debt are self assessed tax. Iíve been in a spiral of taking our credit cards and loans to pay and itís just got worse. I had considered sequation or trust
Deed but my big problem is what I owe family and friends. I work contract and have an option of working overtime (purely voluntarily) and can sometimes make £400 a month extra through this. I expected I could keep 50% and pay the rest to the creditors. That would allow me to pay back family and friends. Iíve since read the trust deed will keep 100% overtime. This seems crazy as with no financial incentive I would work only my base contract hours and the creditors could lose out on £2000+ extra a year just for the incentive. Is this true and do any other debt arrangements allow a portion of overtime to be kept? Many thanks in desperation!

Kevin Mapstone
Trust Deed Expert



3812 Posts

Posted - 08 January 2020 :  13:11:01  Show Profile  Reply with Quote
Hi KeitherReeve,

Yes, the information you have read is correct - all spare income has to be paid into a Trust Deed or Sequestration, including overtime. Whilst I can understand why you would want to treat the money owed to your family and friends differently, they are basically just debts like the others under the law and cannot be given preferential treatment in an insolvency situation.

A Debt Payment Programme (DPP) under the Debt Arrangement Scheme (DAS) allows for more flexibility, so perhaps this may be the best solution for you. Under this scheme you do not have to pay your full disposable income to your debts but would just make whatever repayment offer you wish. The drawback is that there is not usually any debt write off involved in a DAS DPP as there would be in a Trust Deed or bankruptcy. Interest is frozen and you are protected from any further action by your creditors, but you do repay your debts in full over however long that takes.
I presume the problem you are having with much of it being income tax debt is that HMRC are not willing to accept repayment offers over that kind of period? If so then DAS may be able to help with that, as if it is deemed to be a "Fair and Reasonable" offer then HMRC can be forced to accept it.

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Edited by - Kevin Mapstone on 08 January 2020 13:13:03
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David Tannock
Trust Deed Expert



2323 Posts

Posted - 08 January 2020 :  13:43:27  Show Profile  Reply with Quote
Hi KeitherReeve and welcome to the forum.

Sorry to hear that you have found yourself in some financial difficulty. Itís a lot more common than you think and well done on taking the brave step to reach out for some help and advice. Plenty of help and support on the forum.

As Kevin has said in a Trust Deed or Sequestration all of a clientís surplus income needs to be paid over into the plan.

From an advisors perspective I completely agree with you about the extra overtime being voluntary and there being no incentive for you to do this and pay extra to the debts. Prior to 2013 and the legislation change most advisors used to be flexible and understanding when it came to things like a bonus or overtime, both of which someone normally has to go over and above. Now with the change in legislation we canít do that.

A Debt Arrangement Scheme may be a more suitable option as this provides greater flexibility when it comes to income and expenditure. When it comes to a DAS sometimes HMRC can object to them and if that happens then your case is referred to the Accountant in Bankrupptcy (Scottish government department that oversee Trust Deeds, DAS and Sequestration) to carry out a fair and reasonable test as Kevin mentioned. If the AIB deem it to be F&R then the plan can go ahead and provide you with the legal protection and a fixed payment per month.

The best thing to do is reach out to an expert for some advice on the specifics of each plan and for them to work with you to see which one is the most suitable. The key with any plan is to ensure that any payment is affordable and sustainable. A good knowledgeable and experienced expert will be able to look at everything for you.

Do you own any assets, car or a house?

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KeitherReeve
New Member

6 Posts

Posted - 08 January 2020 :  16:16:45  Show Profile  Reply with Quote
Thanks so much for all your advice. One of your colleagues has already emailed me so I cannot begin to thank how much this site must help everyone in my situation with your straight forward and very speedy advice.

I donít have any assets at all. My car is a lease agreement, I live in a rental home and I donít believe I have any assets worth over £500. Even my sofas and furniture are almost 10 years old. HMRC make up approximately 20% of my debt and I believe with a DAS that would still allow me to continue living (albeit more frugal!) I could pay it all back in under 5 years. This is around the time my loans run until (maybe a year or two more) and certainly well within the time the credit cards would be repaid on minimum payments. I donít believe they would disagree but HMRC could be the spanner.
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KeitherReeve
New Member

6 Posts

Posted - 08 January 2020 :  16:22:20  Show Profile  Reply with Quote
Also how strict is the DAS budget? Can I keep some money back to pay off family and friends? As long as the payment time is reasonable (no more than 5 years), and also take home any voluntary overtime for either a) emergencies or b) clearing the DAS quicker?
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TDA (Debt Adviser)
Trust Deed Expert



13254 Posts

Posted - 08 January 2020 :  19:51:20  Show Profile  Reply with Quote
Welcome to the forum KeitherReeve.

Your budget will be more flexible in DAS than it will be with a protected trust deed.

There's no requirement to pay over your full disposable income into a debt arrangement scheme. The key aim is simply to put together a repayment proposal that is acceptable to your creditors, manageable for you, and that will get you out of debt within a reasonable period of time.

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KeitherReeve
New Member

6 Posts

Posted - 09 January 2020 :  06:34:59  Show Profile  Reply with Quote
Thank you again. I would be looking at what I think is a very reasonable offer whereby I pay more than I am at the moment (but include HMRC debt outstanding) which would cover all costís over 5 years (with the plan of using additional income where I can to clear it a year earlier). This would still leave me enough disposable income to look after myself and my girlfriend and pets but would be more than what I would have under a trust deed. I would even be willing to contribute the extra 10% I believe the creditors pay for the DAS if this would be a sweetener in the agreement. I need the higher disposable income for emergencies (especially vetinary) and to pay back personal debts.
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David Tannock
Trust Deed Expert



2323 Posts

Posted - 09 January 2020 :  10:40:10  Show Profile  Reply with Quote
Hi KeitherReeve,

It sounds like you are taking a very sensible approach to thinking about your options and also your income and expenditure and what is affordable and sustainable.

This is the key part is to ensure that any payment is affordable and sustainable. Plans can fail as a result of a client trying to cut back too much on their budget to pay as big a payment as possible. From my perspective itís about finding a balance between a client still being able to live and a payment the lenders are happy with. 4-5 years can feel like a lifetime if you are struggling every month with a tight budget.

If HMRC only have 20% of your total debt and if they did object to the DAS proposal Iíd be more confident that the Accountant in Bankruptcy would find in your favour when they carried out their fair and reasonable test.

By taking your time and asking lots of questions and really thinking about your budget Iím sure you will make the right decision on which plan bests suits your circumstances.

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Kevin Mapstone
Trust Deed Expert



3812 Posts

Posted - 09 January 2020 :  15:08:00  Show Profile  Reply with Quote
Sounds good, KeitherReeve - as long as you are being realistic about what you can afford to pay. I'd be very surprised if you couldn't get agreement to a proposal that repays your debts within 5 years.

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KeitherReeve
New Member

6 Posts

Posted - 10 January 2020 :  08:51:34  Show Profile  Reply with Quote
I think I spent so long burying my head in the sand and thinking it would all go away. Then when I saw no way out I carried out a number of bucket list items the last few years with the view when it all finally caught up with me I could disappear or be killed in some tragic Ďaccidentí. However I now have set myself small targets for 2020 (first was reaching out for help) and aim to have all debts cleared off in 5 years maximum (not just written off!). Should I be prioritising any debts at the moment by stopping paying certain loans or credit cards to priorities those such as HMRC? Or just continue doing as I am doing until getting a DAS agreed (hopefully!). Also, should I write to each creditor and explain my situation in advance or would this be done via a DAS agent?
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TDA (Debt Adviser)
Trust Deed Expert



13254 Posts

Posted - 10 January 2020 :  12:54:43  Show Profile  Reply with Quote
Hi KeitherReeve.

Once you're working with an adviser directly I'd suggest following their advice about continuing to pay some or all of your debts.

As a guide, HMRC are likely to resort to legal recovery methods sooner than banks or credit card providers. It would make sense to pay an affordable sum to them I think.

There's certainly no point in borrowing more money to keep up with your debt repayments.

Your DAS adviser will write to your creditors in due course. If you're not able to continue paying some of your creditors, it's likely they'll contact you. You can advise them that you're getting debt advice and expect to provide them with payment proposals soon. Ask them to give you 30 days breathing space while you get this advice.

Well done on reaching out for help. For a lot of people this is the hardest step to take. Once it's done things can start to improve pretty quickly.

Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds    
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Kevin Mapstone
Trust Deed Expert



3812 Posts

Posted - 10 January 2020 :  12:56:51  Show Profile  Reply with Quote
I'm glad that you've taken the bull by the horns and are sorting this out. There is always a way forward and you have done the hardest part already by reaching out for advice.

In terms of your payments currently, if you can afford to pay some of your debt payments in the meantime then great. I would usually advise that you prioritise any outstanding bills for living costs first - by which I mean rent, utilities etc. Tax debts (including council tax) are probably next on the list as they do have a quicker process they can use for taking legal action and significant extra charges can be incurred if they go down this route.

There is no harm in writing to creditors to explain your situation, especially if you are going to be missing payments, as they may agree to freeze interest/charges that would have otherwise been added.

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KeitherReeve
New Member

6 Posts

Posted - 11 January 2020 :  09:50:18  Show Profile  Reply with Quote
A huge thanks to everyone on this forum, it has been a huge weight lifted. Knowing my credit record will be screwed (which is sad because Iíve had an impeccable record for 15 years) I will cease paying to loans / credit cards to pay more to HMRC and thanks to the huge support here I have already started the DAS process so for the next few months I will pay as much as I can to HMRC and ignore the others until the DAS process is complete.
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TDA (Debt Adviser)
Trust Deed Expert



13254 Posts

Posted - 12 January 2020 :  11:57:09  Show Profile  Reply with Quote
Thanks for your kind words KeitherReeve.

Please let us know how everything develops over the coming weeks.

Qualified Debt Adviser & Forum Administrator - Ask me anything about Trust Deeds    
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