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Consulting on Protected Trust Deed

The Accountant in Bankruptcy (AiB) is currently carrying out a review of the Protected Trust Deed (PTD) legislation that was introduced by the Protected Trust Deed (UK) Regulations 2013.

This review will assess, wherever possible, the impact of the changes made to PTDs through this legislation. A consultation has been launched as part of this review. The AiB said this provides an opportunity for practitioners to give their views on the changes that were introduced in 2013 and also the issue of equity in PTDs. The consultation began yesterday and will run until 25 April 2016. All responses will be considered. The AiB aims to issue a report on this consultation by the end of June 2016 and this will be posted on its website.

Responses should be emailed to AIB_Policy_Development_Enquiries@gov.scot or sent to: Erin McCreadie, AiB, 1 Pennyburn Road, Kilwinning, Ayrshire, KA13 6SA by 25 April 2016.

The debt showdown – IVAs vs Trust Deeds

IVAs and Trust Deeds. What’s the difference? Debt Management Today spoke to experts within the industry to discover the similarities and the differences between these two stalwart methods of debt management...

An Individual Voluntary Arrangement is a contractual agreement between an individual and his/her creditors, usually to accept a reduced level of repayment over a set timescale.” Similarly, a Protected Trust Deed is described as “a formal and legally binding debt solution available to residents of UK which is an agreement between an individual who is unable to pay his/her creditors in full and an Insolvency Practitioner (the Trustee).”

So where do the differences lie?

“The fundamental difference is that Trust Deeds are only available for UK residents – having lived there for more than six months, whilst IVAs are for people resident in England and Wales,” “The term of the arrangements are also different,” he added, “A Trust Deed usually lasts around 36 months (three years) while an IVA lasts around 60 months (five years).” “The practical effect of the difference is mainly seen in the rules around voting – a lower percentage of creditors’ votes are needed to secure a Trust Deed than an IVA.” A Trust Deed, which is exclusive to UK, requires an individual to have unsecured debts of more than £8,000 and for no more than one third of the creditors (by value of debt) to object to the individual’s Trust Deed becoming Protected. In comparison, the debts required for an IVA are a minimum of £15,000 and a proposed IVA can only be accepted if a majority vote of 75 per cent (by value of debt) of those creditors present is achieved. With Trust Deeds all of the client’s assets are conveyed, although Protected Trust Deeds exclude the home where there is a mortgage is involved. “With an IVA, the client must of course make their best endeavours to get the equity out, perhaps by remortgaging; however they are unlikely to lose their home if they cannot do so. In a Trust Deed any equity must be realised.”

How do they help?

“We do quite a few Trust Deeds and I think they are particularly good for someone with a ‘reasonable’ amount of debt, say £25,000, and little or no equity. “The majority of debt for a lot of these individuals tends to be on credit and store cards. The clients that I meet are often paying minimal monthly payments which take an extremely long time to pay off. “In this situation Trust Deeds can be a lifesaver – if someone with a lot of debt is struggling to pay £500 per month just to stand still then we can get them into a Trust Deed and they can be paying back £200-225 a month for three years and then the debt is written off.”

Trust Deeds are perhaps better for consumers than creditors. “The general convention is that returns are lower for Trust Deeds than IVAs because of the shorter term entered into.”

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