Do I qualify?
Here is an example of how a Scottish Trust Deed could make your debts affordable:
Let say your unsecured debts
looked like this...
Total Owed £28,000
After a Scottish Trust Deed...
New monthly repayment is based on affordability and varies from plan to plan.
Visit our FAQ Section for any in depth information on Scottish Trust Deeds
Owning property arouses very strong feelings in people. To get on the housing ladder is difficult for everyone – the scrimping and saving for a deposit, having to do your own maintenance in the beginning to try and save money, trudging to work and back every day to pay that mortgage – so it’s hardly surprising we are reticent to do anything that could jeopardise all of our hard work.
So when you find out that it’s possible a Scottish Trust Deed could set you back on the property ladder, it might make you want to run for the hills, but stop!
It’s not all that bad...
In 2010, the laws were amended to allow the exclusion of a debtor’s main residence from a protected trust deed, as long as certain conditions are met and any secured creditors involved agree not to claim for any debt under the Scottish Trust Deed. However, if this is not possible then it may be that your Trustee will be looking at the equity in your property, specifically to release it to give to your creditors.
Under the circumstances it would be very difficult to convince a creditor to back off and accept a partial payment of what you owe if you have many tens of thousands of pounds of equity in your property. After all, in their position would you accept a loss knowing the other person had a lot of money available that could be released?
The key to making the process work is to ensure that you give what you can while retaining your ownership of the property and without giving the creditor any cause to reject your Scottish Trust Deed proposal for protection. If that happens, they could go for your sequestration and win a judgement in court to have your home sold.
There are a few different ways your Trustee will explore:
If you have kept up with your payments, and made very few defaults with other creditors, your lender may be willing to let you remortgage your home to release the equity.
If your home is large and you decide you would like to downsize, you might be able to move somewhere new and release some of the equity from your own home in the process.
Mortgage to Rent
A third party company buys your home, the equity released goes to your creditors after costs are paid and you rent the property on a long-term basis so you don’t have to face the upheaval of moving.
If you own your own home and are still working, rather than a mortgage you could undertake an equity release which will be paid back plus interest if you ever sell.
A friend or family member may be willing to pay a lump sum to your Trustee to ‘buy out’ their interest in the equity of your property. You get to keep your home and your friend or family member gets to make a sensible investment in a property.
Your Trustee will look at how much equity is in your property and decide how much of that money should be released to pay creditors. If you did not want to sell your property or you did not or could not get a re-mortgage to release that amount, your trustee will calculate a lump sum amount that they would be willing to accept for them to ‘drop’ their interest in your property. This amount will usually be less than the equity in the house, as the trustee must take account of the actual sum that could have been realised by a re-mortgage or sale once all the fees and costs had been taken into account.
As Scottish Trust Deeds are usually individual agreements and will not include your spouse, they could buy out the Trustee and you could both continue to live in your home. Or if you bought your home with a friend as a tenant in common, they could buy the trustee out for an exchange for a greater percentage of ownership. Alternatively, a family member could do so either as an investment or if they are your parents, as part of inheritance tax planning.
If you are in negative equity, or have such a low amount of equity that the costs of arranging to release wouldn’t leave a worthwhile amount behind, your Trustee will put on hold his interest in your property until the end of your Trust Deed. At that point they will assess your property’s value to see if it has increased and if it has, some of the equity will be released to creditors. Again, your Trustee will be willing to consider being bought out of their interest so you can keep your home.
While many people believe all debt management solutions based on insolvency must mean they will lose their home, in reality nothing could be further from the truth. There are many flexible options that allow you to avoid massive upheaval and stay in your property while satisfying your creditors at the same time.
For more information about how a Scottish Trust Deed could affect your property, call and speak to one of our expert advisers now on 0141 345 2904.