What are the costs and charges of a Protected Trust Deed, and how are these paid?
Trust Deed - Initial Fee
If a Trust Deed is recommended as the most suitable solution for you, and you decide to proceed, Churchwood Finance will charge a fee which will be no more than twice your monthly disposable income figure as calculated in our comprehensive review of your personal financial circumstances. The fee covers the cost of the financial review, processing the associated paperwork and the preparation and submission of your case to the Insolvency Practitioners. Within the Churchwood Finance group, Trust Deeds are managed by Campbell Wallace Fraser Limited.
Trust Deed – Trustee’s fees
The work required to draw up and administer a Protected Trust Deed is summarised below:
Preparation of the Trust Deed Document –
This is the document which explains why you are unable to pay your debts and includes full details of your financial position. The preparation process will require us to confirm the contents of the Trust Deed are accurate by reviewing wage slips, creditor statements, house valuation reports and so forth.
The document will list all your realisable assets, all of your debts, provide a summary of your household income and essential spending and show what you can afford to pay towards your debts through the Trust Deed. The estimated costs of administering the Trust Deed are also detailed so that creditors can see what percentage of their debts is likely to be repaid.
Ensuring the Trust Deed achieves “Protected” status –
As your debts are unlikely to be paid in full, your creditors are effectively bearing the costs of the Trustee’s fees and therefore they may seek to alter the amount we propose to charge for the administration of the Trust Deed. Accordingly the Trustee will negotiate with your creditors to reduce the chances of them lodging an objection to your Trust Deed becoming Protected. If we cannot secure the required acceptance the Trustee will advise you of alternative approaches to managing your debts.
Administering the Protected Trust Deed -
Following your Trust Deed being granted “Protected” status and becoming legally binding on all included creditors, it is the Trustee’s role to ensure the terms of the Deed are followed for its entire duration with monies being collected and then distributed to your creditors. This will include the following steps:
Monitoring Income Contributions. The Trustee will check that you are making payments of contributions on time at the correct amounts. Each year the Trustee will review your income and spending to ensure the amounts paid are fair to creditors and affordable for you.
Asset Realisations. If you are proposing to introduce any assets into the Trust Deed, for example by a remortgage to release equity from a property, the Trustee will check that this is done in accordance with the terms of the Trust Deed.
Creditors. The Trustee will check that the claims of your creditors are correct.
and will then arrange to make regular repayments to your creditors during the course of the Trust Deed.
The amount of the fees varies according to your individual circumstances, and the amount of work that is required to set up and administer your deed. The fees usually range from £3000 to £5000 over the whole term. Your Trustee will be paid before any money is available to repay your creditors.
Example of fees and expenses payable in a typical Protected Trust Deed*
| 36 months contributions at £200 per month |
£7,200 |
| Trustee’s fees |
£3,500 |
| Trustee's expenses |
£470 |
| Balance remaining for payment of creditors |
£3,230 |
|
|
| Debts owed |
£13,700 |
| Percentage repayment to creditors |
24 % |
|
|
|
|
*
This example is based on a Protected Trust Deed where a client has unsecured debt totalling £13,700, with little or no equity in property and completes a Protected Trust Deed over 36 months. All payments are inclusive of VAT where applicable.
Key points about our fees:
We will explain the fees and expenses we propose to charge in a letter to you however any changes will be negotiated with your creditors when annual reports are generated after the signing of the Trust Deed.
If your Trust Deed does not achieve “protected” status we will continue to take monthly contributions to cover the set up costs of the Trust Deed and the Trustee will then decide what route your agreement should take.
If your Trust Deed becomes “Protected”, the Trustee’s fees will be deducted from the contributions you pay into the Trust Deed. The Trustee will also deduct any outlays that are incurred during the administration of your Trust Deed. The outlays payable will be estimated in the Trust Deed document itself but the final amount of these outlays may vary from this estimate.
Once you enter into a Trust Deed it is important to keep up the proposed payments. If you fail to do so, the Protected Trust Deed may fail, and result in your sequestration or you may be handed back to your creditors without discharge from your debt. Your initial payments will be used to pay the Trustee’s fees and expenses incurred before any payments will be made to your creditors. If the Trust Deed fails you will remain liable for payment of any outstanding Trustee’s fees and the balances of your debts which are likely to have gone further into arrears.
Your credit rating is likely to be affected for up to 6 years. You may not be able to obtain credit in the short term, and possibly in the medium to long term either.
Protected Trust Deeds do have some flexibility should your circumstances change, and the Trustee will provide guidance to you should the need arise.
A trust deed may affect your credit rating & may remain on your file for up to 6 years. A fee may be applicable depending on suitability and qualification.
*As long as the terms of the agreement are adhered to
** If you breach any of the terms within the agreement the trustee can apply for your trust deed to be brought to an end and your debt to be transferred back to you.
