Man in Debt Goes to Extreme Measures: Alternative Debt Advice

Ross Humphries, a man with severe debt problems is facing a three year jail term for agreeing to be a courier of 45 Kilograms of cannabis resin which was worth around £280,000. Mr Humphries received a fee of £250 for his services.

The class B drug was found in Mr Humphries car when he was stopped by police on the M1 in May 2011.

Mr Humphries was a man described as a 'hard-working family man who fell on hard times and got into debt'.


What to do in debt?

It's understandable people in debt may feel stressed and panicked about their debt problems however committing crimes to survive is not a sustainable way solution to debt.

There are numerous debt solutions which people can utilise to resolve their debt problem. These solutions include general money advice, debt management plan, refinance, full and final settlement, IVA, Trust Deed or potentially Bankruptcy.

Protected Trust Deed Statistics

A protected trust deed is a legally binding agreement between a person in debt and their creditors. This video shows which area were highest for protected trust deeds in the last year. This statistics and the protected trust deed checker can be found here http://www.debtsupporttrust.org.uk/how-can-we-help/protected-trust-deed 


or here for the checker

http://www.debtsupporttrust.org.uk/media/37787/protected%20trust%20deeds%202010-2011%20checker.xls

Debt Solution - Protected Trust Deed

Protected Trust Deed is a debt solution which was introduced 1985 and has had a range of changes since then. A protected trust deed was introduced to help people pay as much of their debt as possible and stop them having to become sequestrated. This option is only available to people who reside in Scotland the English, Welsh and Irish equivalent is an IVA.

 

If someone meets the criteria and wishes to go ahead with a trust deed then an insolvency practitioner (I.P) will collate all the relevant documents. Once the I.P has all the documentation they will advertise the trust deed in the Edinburgh Gazette in order to let all creditors know about the proposal. If 1/3 in value or a majority in number of creditors do not refuse the offer then the trust deed becomes protected. Before considering a protected trust deed it is important to understand the criteria, positives and negatives of this solution.

Criteria

• Need to be able to make a monthly payment to your creditors of at least £125
• Unsecured debt must be £10,000 or more
• Need to be in full time employment
• need to be able to repay a minimum of 10% of the money borrowed over the course of the protected trust deed to your creditors

Positives of a Protected Trust Deed

•  Only one monthly payment to the debt
• Interest and charges will be frozen, Unless the Protected Trust Deed fails at any stage, or you receive a windfall, then it is a requirement that interest and charges are repaid.
• Will not have to liaise with your creditors as the insolvency company will do this on your behalf
• Once a Trust Deed is signed it become protected and therefore means you and the creditors will be legally bound by the agreement, which means if the agreement is complete you will be debt free.
• A homeowner may be able to retain their property, the Insolvency Practitioner will only be interested in any available equity
• Will have less of an effect on a persons credit rating than if they entered sequestration

Negatives of a Protected Trust Deed

• If there is any available equity within a property this may have to be included in the Protected Trust Deed proposal
• A Protected Trust Deed may adversely affect a persons credit rating
• Employment contract may not allow someone to enter a Trust Deed - they would need to check this with their employer
• If someone enters a Trust Deed and does not meet the terms of the agreement they are likely to face Sequestration
• A person will have their income and expenditure reviewed regularly and their monthly payments could fluctuate up as well as down

Scottish Debt Solution - Protected Trust Deed

Scotland has an independent debt solution for people who face financial problems. It's an agreement between debtors and creditors for a debt repayment. This option was introduced to help people without them having to declare themselves bankrupt and to help creditors regain a portion of the money they are owed.

If a person is on the brink of bankruptcy it would be advised to seek professional help to asses whither they are suitable for a trust deed. The first thing people should understand is how a Trust deeds works, and what the criteria for this debt solution is. If a person has high unsecured debts and are unable to repay these then it could be the best option for them. While a Trust Deed is likely to have a severe impact on a persons credit rating, it is considered a better solution than bankruptcy A person owes 3 creditors a total of £25,000, if this were divided into;

£15,000 is owed to 1st creditor

£5,000 is owed to 2nd creditor

£5,000 is owed to 3rd creditor

This would mean that the 1st creditor would have the majority right and if they refused then it would not be accepted even if the other 2 creditors voted in favour. So long as the creditors agree to accept the payments then the debt solution can begin however they can object the offer within 5 weeks.

A proposal can be accepted if no objection is made or half of the creditors don't object. A creditor is official considered to be notified if a public notice is made in relation to the offer and they don't decide to make any objections. Once the offer has been accepted by the creditor then the trust deed becomes protected because it is then that it is legally binding. Trust deeds are legally binding so as long as a person does not default then the creditors will not be able to change their decision at a later date.

A trust deed can work out well for both the creditors and the debtor because the other solution would be bankruptcy, mean the creditors would get even less. Something everyone must know before going into a trust deed would be that all assets that are unessential to the creditor can be sold by the trustee and included into the trust fund. Commodities or vehicles can be sold if they are not used for work or any other essential need. The amount received from selling these item would then go into a pot before any proposal is made to creditors. If someone has equity in their property then this must be released. Again the money raised from this would go into the pot and once the trust deed is complete then the debtor would be better off then they would have been with an sequestrated. This is because with sequestration the debtor would be forced to sell any asset first. If a person is struggling to get a loan to release the equity then a family member would be allowed to do it on their behalf. Trust deeds help those living in Scotland to pay their debts without having to become sequestrated. While a person is likely to lose assets and possessions with a trust deed, the choice between this and sequestration is one which can't be taken lightly and leaves no choice for those who are in a financial struggle.

Introduction To Trust Deeds

A large number of people in Scotland are entering the Protected Trust Deed debt solution. This is known as the IVA in England, Wales and Northern Ireland. Last years almost 8,000 people entered a Protected Trust Deed to resolve their debt problems. In this article we'll explain who is suitable for a Trust Deed and who would not meet the criteria

What is the criteria?

You must;

- Be able to repay at least 10% of the money you borrowed over a 3 year period

- Owe at least £10,000 unsecured debt

- Be able to pay £150 towards your debt each month

An example of a Trust Deed

Steven from Glasgow is 30 and married to his wife Karen. Steven has 5 debts (2 credit cards, 2 store cards and an overdraft with his bank) which totals £30,000. Karen has an overdraft totalling £1,500. Steven and Karen has a mortgage which has £100,000 outstanding. The value of the house is roughly 100,000 - there is no equity in their house.

Steven works full time and earns £1,300 each month after tax. The monthly expenditure for Steven is £1,000. So, Steven has £300 disposable income available to pay his debts each month.

The problem is that Steven's monthly contributions to his debts are £800. As a result, Steven is having to borrow money from other credit cards to meet his money payments. A debt management plan is one solution for Steven. If he managed to freeze his interest and charges he could have his debt repaid in just over 8 years. There is also a solution called a debt arrangement scheme (Scotland only) where he could enter a legally binding debt management plan type solution.

Steven would also be applicable for a trust deed as well as sequestration. The Trust Deed would see Steven repay an estimated 30% of the debt he borrowed over a three year period. If he completed the solution he would see his interest and charges, along with the rest of the money he owed, being cleared. Sequestration would also be an option for Steven, with Steven being discharged after one year from the Sequestration. As Steven has available money he would be asked to make a contribution towards his debt for a total of three years.

All debt solutions will negatively effect Steven's credit rating.

When would the Trust Deed not be applicable

Steven would not be suitable for the Trust Deed or Sequestration if the equity in his house was more than his debt. Karen would be entitled to half of the equity in the house, however if Steven had £50,000 equity in his house, then he would be entitled to half of this (£25,000).

The £25,000 along with 36 monthly payments of £300 towards his debt would see Steven repay more money than the actual debt he had