What happens if my Trust Deed is rejected?
Before your Trust Deed (TD) becomes legally binding and known as a Protected Trust Deed it has to be agreed by the majority of your creditors.
They are sent a copy of your proposal and are then given five weeks to consider it. As long as no more than a third in value of the creditors decide reject it will be accepted.
Although sensible Trust Deed proposals are normally accepted this is not always the case. More than a third of your creditors could reject your proposal outright or more usually request modifications to the proposal which you must then in turn accept or reject.
If you feel you are unable to agree to the modifications that your creditors request which these are normally concerning the amount you pay into the Arrangement each month then it will be treated as rejected. You then need to decide what to do next.
If your Trust Deed is rejected will you be forced to go Bankrupt?
One of the concerns people have before they propose a Trust Deed is that if their proposal is rejected they will be forced to go bankrupt.
This is absolutely not the case. If your TD proposal is rejected or you feel that you cannot accept the modifications requested by your creditors, then you are not forced to do anything.
You will simply be in exactly the same position as you were in when you first thought about proposing a TD. Your creditors will still be owed money that you cannot afford to pay them and they are at liberty to continue their collection activities against you.
For this reason you will normally need to take some form of alternative action.
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Can you submit a new Trust Deed proposal?
You might feel that the Trust Deed solution is the very best way to resolve your debt problem. If this is the case there is nothing to stop you submitting a new proposal which might be more acceptable to your creditors.
You can decide to make your new proposal through the same insolvency practitioner if you wish. Alternatively you can chose to use a new insolvency practitioner.
Ultimately if you want to submit a new TD proposal you will have to make sure you change the terms of your offer so that it is more acceptable to your creditors again. Otherwise the proposal is likely to be simply rejected all over again.
Should you start a Debt Arrangement Scheme
A popular alternative to the Trust Deed solution is the Debt Arrangement Scheme (DAS). This agreement simply reduces the payments you make to your creditors to an amount that you can afford.
Once it is in place you will be legally protected from any further collection action from your creditors and further interest charges are frozen.
However the key difference compared to the TD is that your creditors will expect to be paid in full however long this takes. They will not agree to write off any of your debt.
In order to start a DAS in theory your creditors still need to agree the proposal. However in reality it is very unlikely that they will not agree.
Can you declare yourself Bankrupt?
Of course one of the options open to you if your Trust Deed is rejected is to decide to go Bankrupt yoyrself. You will never be forced to chose this option but for many people it may quite simply be the next best thing.
If you are renting you are likely to lose very little if you declare bankruptcy. The same will apply even if you are a home owner as long as you have little or no equity in your property.
Bankruptcy should not therefore be rejected out of hand and may even work out a better solution for you than a Trust Deed in the long run.
Generally a Trust Deed will be accepted
It is important to remember that the vast majority of Trust Deed proposals are agreed by creditors. This is because most Insolvency Practitioners will not want to submit an TD proposal that they feel has no chance of being accepted.
If you are working with a reputable Insolvency Practitioner and the offer you are making to your creditors is reasonable and the best that you can, then it will almost certainly be accepted.
However a Trust Deed is not formally in place until it is agreed by your creditors. As such it is always worth understanding your options just in case agreement cannot be reached.
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