What happens to my assets if I enter into a Protected Trust Deed

Quite naturally, the question of what will happen to any assets causes much concern for people looking to enter into a Protected Trust Deed.

After all, a Trust Deed is designed to be an alternative to bankruptcy and, as a result, those people who are considering the Trust Deed option generally understand that their financial position is in a serious condition and in need of a serious solution.

To enable the Trust Deed to become ‘Protected’, the applicant will need to disclose a list of all his assets to the Trustee, just as he would in bankruptcy.

The Trustee will make an assessment on how best to deal with these assets to generate the greatest benefit to the creditors. It will be down to the Trustee to determine which assets will be sold or kept, again, just as would happen in bankruptcy.

This part of the Trust Deed process is essential for those who hope to have their Trust Deed accepted for ‘Protected’ status by their creditors.

Without the transfer of all assets to the Trustee the Trust Deed cannot become ‘Protected’, and therefore would never become legally binding on the creditors who refused to be bound by the Trust Deeds original offer.

So, to repeat for the sake of clarity, the Trustee needs to be able to show the creditors that all the Trust Deed applicant’s assets have been treated in the same manner as they would in a bankruptcy, in order to be able to seek ‘Protected’ Status for the Trust Deed.

We have explained how the Trustee will deal with equity in a property in one of our previous answers, but for further details you may prefer to download our FREE guide “How will a Trust Deed affect the Equity in my Home“

We will now explain in principle what happens to other assets, such as a car or work vehicle?

Quite simply, the Trustee will decide what happens. He will assess not just the value of the asset, but also how essential to the everyday needs of the applicant the asset is.

For example: If a Trust Deed applicant owns a car with a value of £4,500 and he uses the car to get to and from work each day, the Trustee will see that it is in the best interests of the creditors to allow the applicant to keep the car – thus enabling the applicant to keep his job, which will generate the surplus income needed to support the Trust Deed’s payments.

If, on the other hand, the car had a value of £10,000, the Trustee might see the benefit of making the applicant downsize the car, allow him to replace it with a less valuable one of say £4,500 whilst generating £5,500 cash for the benefit of the creditors.

Trying to put forward a rational argument to keep some other types of assets – such as Caravans, Boats, Holiday Homes or Time Shares will be much more difficult, but again it will be down to the Trustee to determine what can be kept and what will be sold.

Cash savings may be at risk too, as could any Stocks and Shares and even expensive items of Jewellery.

It is also well worth noting that for the full duration of the Protected Trust Deed, the applicant will be required to inform the Trustee of any new assets he may acquire.

Typically this may come about through an inheritance or if you receive a windfall, but it is not confined to those two events – indeed, it could be as a result of a ‘Critical Illness’ health insurance policy payout, a work bonus paid in shares or a generous gift.

However, this only applies to Protected Trust Deeds whilst they are active.

Once the Protected Trust Deed has completed successfully the Trustee and the creditors lose any future claim on any new assets or windfalls.

As part of making an informed decision, anybody considering entering into a Protected Trust Deed should make themselves fully aware of the legal responsibilities they will have to the Trustee, and in turn the demands the Protected Trust Deed will make upon them.

Entering into a Protected Trust Deed is a serious step for anyone to take, and deserves full and careful consideration, especially if you have, or are soon likely to inherit assets.

Any Trust Deed applicant who is concerned about what will happen to their assets in a Protected Trust Deed should seek further advice from our Trust Deed Helpline on 0800 088 7503, where we will be able to advise you on your specific circumstances.