Protected Trust Deed - Is My Home Safe?
Protected Trust Deeds (PTD) are an alternative to bankruptcy for people living in Scotland.
A P.
T.
D.
allows for the Trust Deed applicant to reduce their debt repayments to their creditors to an affordable level, whilst protecting them from the possibility of their creditors taking legal action against them.
However, because a P.
T.
D.
last just 3 years, most applicants will be unable to repay their total outstanding debts within the term of the P.
T.
D.
As a result, their creditors are legally obliged to write off any of the unpaid debt when the P.
T.
D.
has been successfully completed.
For this reason, creditors need to be confident that the applicant will adhere to the principle of repaying as much as they can afford.
So, to make sure this is the case, a licenced Insolvency Practitioner is appointed to act as Trustee and administer the Protected Trust Deed from start to finish.
In a Trust Deed, the Trustee takes ownership of any assets the applicant might own or part own and the Trustee is obliged to maximise the value of any assets for the creditors.
Generally speaking, the most common type of asset will be a family home, so how would the Trustee propose to release equity held in someone's home? Typically a valuation will be taken to establish if there is any equity in the home, if there is, the Trustee will be responsible for releasing it.
How he chooses to release it will depend on just how much equity there is, however, as the value of equity increases, it becomes more difficult to stop the Trustee from selling.
If there is little equity in a property the Trustee can allow for the future equity to be 'ring-fenced'.
This enables the applicant to fix the equity value to save the equity increasing during the P.
T.
D.
By agreeing the value of the equity early on, the applicant freezes the value at that level.
In cases where there is just too much equity available to allow the applicant to arrange for a buy out of the equitable interest from the Trustee, the property will be sold.
The Trustee will exercise his legal obligation to the creditors to do what is in their best financial interests and return to them as much of the outstanding debt as possible, whilst maintaining a level of consideration for the applicant.
So, before you take any further steps towards a Protected Trust Deed, if you have a family home, it is essential to get the facts on how the equity in your home will be dealt with, before it's too late.
A P.
T.
D.
allows for the Trust Deed applicant to reduce their debt repayments to their creditors to an affordable level, whilst protecting them from the possibility of their creditors taking legal action against them.
However, because a P.
T.
D.
last just 3 years, most applicants will be unable to repay their total outstanding debts within the term of the P.
T.
D.
As a result, their creditors are legally obliged to write off any of the unpaid debt when the P.
T.
D.
has been successfully completed.
For this reason, creditors need to be confident that the applicant will adhere to the principle of repaying as much as they can afford.
So, to make sure this is the case, a licenced Insolvency Practitioner is appointed to act as Trustee and administer the Protected Trust Deed from start to finish.
In a Trust Deed, the Trustee takes ownership of any assets the applicant might own or part own and the Trustee is obliged to maximise the value of any assets for the creditors.
Generally speaking, the most common type of asset will be a family home, so how would the Trustee propose to release equity held in someone's home? Typically a valuation will be taken to establish if there is any equity in the home, if there is, the Trustee will be responsible for releasing it.
How he chooses to release it will depend on just how much equity there is, however, as the value of equity increases, it becomes more difficult to stop the Trustee from selling.
If there is little equity in a property the Trustee can allow for the future equity to be 'ring-fenced'.
This enables the applicant to fix the equity value to save the equity increasing during the P.
T.
D.
By agreeing the value of the equity early on, the applicant freezes the value at that level.
In cases where there is just too much equity available to allow the applicant to arrange for a buy out of the equitable interest from the Trustee, the property will be sold.
The Trustee will exercise his legal obligation to the creditors to do what is in their best financial interests and return to them as much of the outstanding debt as possible, whilst maintaining a level of consideration for the applicant.
So, before you take any further steps towards a Protected Trust Deed, if you have a family home, it is essential to get the facts on how the equity in your home will be dealt with, before it's too late.
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