Answers to your questions

Personal - Frequently Asked Questions

Re-mortgage

Sequestration

Protected Trust Deeds

Re-mortgage

Do I need to be the only owner of the property to apply for a remortgage?

No, even if you own a property jointly with someone else (such as husband, wife or partner) a remortgage is possible provided the other interested party agrees.

How does re-mortgaging work?

Each lender operates different criteria and therefore the following list is a generalisation and should not be taken as a definitive guide, merely a key point guide.

The new lender or their agent will:

  • Write to your existing mortgage lender to confirm the outstanding balance on your existing mortgage;
  • Check that there is enough value in your property to cover your existing borrowing and allow for additional borrowing;
  • Arrange for all legal documentation to be completed;
  • Repay on your behalf your existing mortgage;
  • Send you (or any agent appointed by you) the balance of funds between the new mortgage advance and the amount required to clear your existing mortgage.

How long does it take to get a remortgage?

Normally, new lenders will make a mortgage offer quickly after the application is made therefore, subject to all legal requirements being met, a remortgage can normally be finalised within 8 weeks of a mortgage offer being made.

Who needs to know about my remortgage?

Apart from yourself only the following will know about the remortgage:

  • Your existing lender
  • New lender
  • Any joint owner of the property
  • Any person who has occupancy rights
  • Any agent you instruct in this matter
  • Your trustee in a trust deed

However, the deed in favour of your new lender will be registered on the Land Register. This register is a matter of public record and is open to examination by anyone who wishes.

Once I have remortgaged and repaid my debts what happens to any funds left?

The funds (if any) released by the remortgage, having repaid your mortgage lender and any third party with a security over your property, will be sent to you or your nominated agent. You should obtain independent financial advice in this regard. If required, we will introduce you to an independent mortgage broker.

Sequestration

What is Sequestration?

Sequestration is the Scottish equivalent to Bankruptcy. Sequestration is the most extreme solution to debt and should only be considered as a last resort having exhausted all other options.

Your estate will vest in an appointed Trustee who is legally obligated to realise your estate for the benefit of your creditors. Although Sequestration will normally last for one year you may have difficulty obtaining credit for a longer period.

If you owe £1,500 (due to be increased to £3,000 shortly), and you are able to demonstrate apparent insolvency to the accountant in bankruptcy, you or a qualifying creditor can petition for your sequestration. All assets must be realised including any equity you may have built up in your home, cars or other assets.

How long does a Sequestration last?

The minimum period of Sequestration is one year. As long as you co-operate with your Trustee you will be automatically discharged on the first anniversary of the commencement of sequestration.

What are the implications of Sequestration?

The key points are:

  • All of your estate will vest in an appointed Trustee who will realise it for the benefit of your creditors;
  • You will be expected to contribute any surplus income over a three year period;
  • Should you obtain a windfall, lottery win, inheritance etc during the course of the Sequestration you will be obliged to turn this over to your Trustee for the benefit of your creditors.

What is apparent insolvency?

Certain conditions are needed for someone to be sequestrated in Scotland. They must be 'apparently insolvent' whether they are making themselves bankrupt or being sequestrated by someone else.

You will find the full legal meaning of apparent insolvency in section 7 of the Bankruptcy (Scotland) Act 1985.

However, the most common forms of apparent insolvency are shown below.

A creditor has been to court, got a decree, and has had a charge for payment served on the debtor and the 14 days allowed for them to pay have passed without them making a payment.

A creditor has served a statutory demand on the debtor telling them to pay the debt within 21 days and they have not paid the debt or sent the creditor a letter by recorded delivery denying that the debt is due for payment.

The debtor has signed a trust deed and it fails to gain protection because their creditors have objected

What happens to my home if I am sequestrated?

If you have equity in a house (i.e. the house has a value in excess of any mortgages on the property), even if it is jointly owned, it may have to be sold.

What happens if I have a windfall during the Sequestration?

If you have a windfall during the Sequestration for example, you are a beneficiary in a will, have a lottery or other such win, receive bonuses or similar then you will be required to pass these to your Trustee for the benefit of your creditors.

Protected Trust Deed

What is a Trust Deed?

A Trust Deed is a legally binding agreement between you and your creditors in which you agree to make a regular contribution from your income and to release certain assets to your trustee. Your trustee will then negotiate with your creditors on your behalf and pays them a proportion of the amount owed to them. It is real alternative to Bankruptcy and normally lasts for three years. At the end of a Trust Deed the balance of any unpaid debts included in the arrangement is written off.

As this is a legally binding document you may wish to take independent legal advice.

Under legislation, If your creditors do not object to the Trust Deed it will become protected and therefore binding on all your unsecured creditors.

How long does a Trust Deed last?

A Trust Deed will normally last for 3 years but may be extended by the trustee in certain circumstances.

How long does it take to set up a Trust Deed?

A trust deed can be set up very quickly, it requires a telephone interview or face to face consultation when we will explain clearly and in detail what is involved. Even if our advice, given your individual circumstances, is that a trust deed would be the best solution for you, you are under no obligation to sign and we will be happy to explore other solutions with you.

After you have signed the trust deed it is necessary to advertise the trust deed in the Edinburgh Gazette and write to all of your creditors. Your creditors have 5 weeks from the publication in the Gazette to object to the proposal set out by your Trustee. Provided no more than one third in value or a majority in number of your creditors object then the Trust Deed will become protected. This means that your creditors can no longer pursue you for recovery of any debt incurred prior to the Trust Deed being signed.

What will my creditors think about a Trust Deed?

Creditors have five weeks to object to the proposals. Only in cases where one third in value or a majority in number actively object will your trust deed fail to become protected.

What are the main advantages of a Trust Deed?

A Trust Deed is a realistic and down to earth solution when you have money troubles, when creditor pressure is causing health issues and relationship problems or when it would take you many years to repay your debts

  • Your finances are easier to control with only one affordable monthly payment to your unsecured creditors.
  • You only pay what you can reasonably afford to pay
  • All interest and charges on your debts are frozen
  • Creditor pressure is removed
  • There is no Court involvement
  • No notification to your employer
  • When the Protected Trust Deed is completed all remaining unsecured debts are written off.

What are the main disadvantages of a Trust Deed?

  • Existing arrestments and other diligence continue to be effective. Although Councils who carry out earnings arrestments are generally willing to consider lifting arrestments upon protection being gained.
  • You cannot be a company director of a limited company unless the company's Articles of Association state otherwise.
  • The arrangement is binding on you as well as your creditors. If you were to default on the arrangement then the Insolvency Practitioner can petition for your Sequestration.
  • Entering into any arrangement with your creditors may affect your credit rating.
  • Creditors are not obliged to accept a proposal for a Trust Deed. However, the Trustee will negotiate with all of your creditors.

What effect will a Trust Deed have on my home?

You will still be expected to continue to make your normal mortgage repayments. A secured lender (e.g. the Bank or Building Society which holds the mortgage) is not bound by the Trust Deed and retains its normal rights.

The only interest the Trustee is likely to take in your home is in respect of your share in any "equity" available. A valuation of the property will be carried out and the level of any outstanding mortgage or secured loans established. Equity is the difference between the value of the property and the outstanding debts secured on the property. Equity will therefore be calculated and arrangements made for this sum to be paid to your Trustee. This can be done by re-mortgaging, a payment being made from a third party (often a family member) or additional payments being made at the end of the Trust Deed term

What effect will a Trust Deed have on my car?

The Trustee's interest will only be in any equity which exists in the car. If the car is subject to hire purchase, this will be taken into consideration when determining any available equity. If your car is required to travel to and from work, in most instances you will be allowed to keep it for the duration of your trust deed. If however, the vehicle is considered expensive, the Trustee may suggest that you trade it in for a less expensive model.

What effect will a Trust Deed have on my household possessions?

Whilst the sale of household possessions is possible, in practice it is unlikely unless they have a high value.