One of my clients phoned me yesterday asking for an urgent appointment. It turned out she had been put in sequestration (bankruptcy) due to a debt of a few thousand pounds of council tax arrears. She had no mortgage arrears and was not behind in any other payments. However, she now faces losing her house and is obviously very stressed.
It was all so unnecessary because she has plenty of equity in her house which she could have used to pay her debtors. If she was really struggling and had no alternative she would still have been better taking a Protected Trust Deed (IVA in England) than becoming bankrupt.
She has admitted to me that she just tried to block it out of her mind and hope it would all go away. There may be a way to save her house but it is not going to be easy.
What Is a Protected Trust Deed?
It is a way of getting your finances back under control It is fair to everyone involved and is legally binding, formal arrangement with creditors.
How Does it Work?
The Trust Deed Company will help you work out the total that they can afford to pay back to their creditors. They will then write to the creditors to advise the estimated dividend calculated from monthly payments (usually over 3 years), by means of a lump sum payment or a combination of both.
How Much Will It Cost?
This really depends on your circumstances. They will look at your monthly income and expenditure to calculate a monthly amount that you can afford. This regular amount will then be paid into a bank account in the Trust Deed Company’s name as your Trustees, from which the money is used to clear your debts.
Who Is Eligible For A PTD?
Anyone who is struggling to make their debt payments. The Trust Deed will gather all relevant information and assess the financial circumstances to see if the criteria for a PTD can be satisfied.
Advantages Of A PTD Versus Disadvantages Of Sequestration
Consumer Advantages of a PTD
- Immediate protection from creditors
- One affordable monthly payment
- Avoids sequestration and social stigma
- Keep House and Car
- Interest payments frozen
- Legal action stopped
- Debts written off in 3 years max
- Can be done by a one-off payment
- Credit rating not automatically effected
- Still possible to re-mortgage
Sequestration Disadvantages
- Not possible to re-mortgage
- Stigma/adverse publicity
- Future credit rating affected
- Legal restrictions
- Effect on personal qualifications
- Investigation into your affairs
- Cannot be a company director
We work closely with several companies who administer Protected Trust Deeds. Whatever you do not ignore your situation. It may be too late in the day for my client but it’s not for you – act before others act on your behalf… to your detriment.
