Example of the fees that may be incurred during the administration of a Trust Deed:
All Trustee’s fees and outlays for the administration of a Protected Trust Deed are covered by the individual’s income contribution and/or the sums realised from their assets. An individual’s income contribution is agreed before signing a Trust Deed and you do not have to pay any additional fees to your Trustee or Harper McDermott.
The Trustee’s fee is made up of the following:
- Fixed fee – typically ranges between £1,000 to £2,500, this may vary depending on the creditors’ requirements and the work involved in the Trust Deed
- % realisation fee – this fee is based on the realisations made by the Trustee from an individual’s income and assets, typically ranges between 10-20% of the total receipts, this may vary depending on the creditors’ requirements and the work involved in the Trust Deed
The Trustee will advise the individual and the creditors of the total fees in the Trust Deed proposal. Should an individual feel it is necessary, they and/or their creditors can request the Accountant in Bankruptcy (AIB), the Scottish Government agency that supervises Trust Deeds, to audit the fee. The AIB charge a fee for this audit, therefore, it may reduce the funds that will be distributed to the creditors. The fee will be taken periodically during the term of the Trust Deed. The fixed and realisation fees are based on the following work being required to setup a Trust Deed and then administer it for a minimum period of 4 years. The Trustee, along with suitably qualified members of his staff, will undertake these tasks (this list is not exhaustive);
- SIP3 advice call
- Preparing the Trust Deed proposal
- Getting the Trust Deed protected
- Dealing with creditors, the AIB and any relevant third parties
- Monitoring payment of the income contributions
- Realising any assets
- Adjudicating on creditors’ claims
- Paying dividend/s to creditors
- Dealing with any changes in personal or financial circumstances during the trust deed that could affect the payments and if necessary, liaising with the creditors regarding these changes
- Carrying out an annual review of the individual’s income and expenditure
- Preparing and sending an annual report to the creditors updating them on the progress of the Trust Deed
- Completing the paperwork to close the Trust Deed
If at any point during a Trust Deed, the debtors feels like they may struggle to pay their contribution, they must contact the trustee immediately. It may be possible to arrange a change in payment amount or a payment break due to extenuating circumstances, if these can be evidenced. If the individual breaches their payment agreement without contact and consent with their trustee, they could be refused their discharge from the Trust Deed which would leave them in the same position as they were before signing the Trust Deed, having to repay all remaining debts in full (plus statutory interest and minus any repayments made via the Trust Deed to date) and dealing with all creditors or, in some cases, the individual may be sequestrated, (made bankrupt), for failing to comply with the terms of the Trust Deed. It is also possible for the Trustee to go directly to an individual’s employer and have the income contribution deducted from their salary, this will only happen if two consecutive payments have been missed and the individual is not co-operating with their Trustee.
Debt Arrangement Scheme (DAS) fees
There are no fees payable by an individual entering into a Debt Payment Plan through the Debt Arrangement Scheme.
This is the same for all individuals whether they use an insolvency practitioner/private sector firm (e.g. Harper McDermott Ltd) or a public sector organisation (e.g. CAB or local authority Money Adviser).
The costs of administering the scheme are borne by the creditors i.e. from every £ received into the scheme, 22p is used to pay these costs; this 22p is split between the DAS Administrator (2p) and the Money Adviser (20p).
There may also be a payment made to the Payment Distributor (PD) and, if so, this would result in the Money Adviser’s fee being reduced by the same amount as paid to the PD. The remaining amounts are distributed amongst all creditors on a pro rata basis and a successfully completed DPP deems all debts to be repaid in full.
It is essential that you maintain your agreed monthly contributions into your DPP. If at any point during the term of your DPP you feel you can no longer afford the payments agreed, you must contact your Money Adviser or their staff to discuss. Contacting us to discuss any payment difficulties you are experiencing or changes in circumstances is essential, DPPs under DAS do provide an element of flexibility. You may be entitled to a payment break in certain circumstances (such as illness or redundancy) or your Money Adviser may be able to review and amend your payment to suit your changed circumstances – this is subject to creditor approval. If you fail to keep up with your agreed payments and fail to contact your Money Adviser to discuss, your DPP may be revoked, leaving you liable for payment of your debts at their original contractual payment level (including interest and less any payments made to date).