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[Twoshoes]

Hi. I am considering a Trust Deed but I have heard that I will not be accepted if my car is worth more than £3000. Is that correct. I am not 100% sure as I know the second hand value of cars has dropped over the last year or two but I think my car is worth around £4500. I need to to get to and from work. Would I have to sell it?

[James Falla]

Hi there Twoshoes and welcome to the forum.

What you have heard is not quite right. If your car is worth less than £3000 and you need it for your job then there is no issue. However if the vehicle is worth more than £3000, you can still do a Trust Deed but you have to pay the difference in the value and £3000 into your Trust Deed. The way that most people get round this if they are intend on a Trust Deed is of course to sell the car and buy a cheaper one. The difference is then paid into the Trust Deed

Ultimately under the rules of the Trust Deed, the car can be valued at the end of the 3 years agreement to double check that the value has not risen above £3000. However generally speaking cars lose value in 3 years (unless you are talking about something that used to be owed by David Beckham) so this is really a non starter.

[Twoshoes]

Thansk for the reply James. Hmmm, so this means that to start a Trust Deed I will have to get a cheaper car. That's not ideal as I would like to keep the car I have if possible as it is pretty reliable. How will the value of the car be checked? Is there any alternative if the value is confirmed at £4500?

[Geraldine]

Hello Twoshoes

Your Insolvency Practitioner will value the car at the time that you start your IVA. Normally they will use something like the Glasses Guide to get a valuation. If you don't have a copy of this you can get a pretty accurate valuation by having a look at similar cars on Auto Trader.

At the end of the day if you do this and believe that the car is worth more than £3000 you need to make sure you discuss this with your IP and understand exactly how they will deal with it. Make sure you get this in writing. You will not necessarily have to sell your car. If a third party can pay the difference into your Trust Deed for you then that would solve the problem. Do you think you might be able to find someone who could help in this way?

[Hayden]

Hi there Twoshoes, if you want to do a Trust Deed and you believe that your car is worth more than £3000 then as Geraldine has said, if you want to keep the car the best thing to do is line up someone who will be prepared to give the difference to the insolvency practitioner. If this is not an option and you do not want to sell and get a cheaper one you may not be able to proceed with the Trust Deed. How much debt do you have and how much can you pay each month? If you can pay off your debt in a reasonable time you might be better off considering a Debt Arrangement Scheme (DAS) where you would be able to keep your car.

[Amy Jellings]

Hello Twoshoes.

Your car may be valued quite conservatively so this might not be the issue that you think it is.

I'm not aware that many people actually change their cars to a cheaper model prior to their trust deed, and if they did they may face some questions about where any surplus funds went.

Often smaller amounts of equity in a car might be made up with a few extra monthly payments, or by some help from friends or family.

[Hayden]

If someone decided to sell their car and get a cheaper one before starting a Trust Deed, as James mentioned I assume that they would have to make sure that they kept the surplus funds and used them as a lump sum payment at the beginning of the Trust Deed. Clearly spending the money would not be an ideal situation to then have to explain away.

I like your suggesting of paying more payments into the Trust Deed to make up the difference Amy. Would that still work if the difference is quite a lot. The difference with Twoshoes' car could be £1500. If they were only paying £150 a month into their Trust Deed, this could add another 10 months onto a 3 year Trust Deed. Would that be acceptable?

[James Falla]

Absolutely right Hayden. If you sell your car before going into your Trust Deed in order to get a cheaper one, you need to make sure you keep the surplus money you make and pay it into your Trust Deed. You must certainly not use it to pay off any debt prior to your Trust Deed as this would be a preferential payment.

In terms of adding payments to the end of a Trust Deed to offset the "equity" in a car, this would only work if the amount was minimal and could therefore be made up in a few months. I suspect that in Twoshoes' circumstances, the prospect of extending the Trust Deed for 10 months might not be acceptable.

[Amy Jellings]

Probably acceptable to the trustee though (assuming the valuation came in at £4500).

Really a preference choice for the client, though having a reliable car throughout a trust deed (that you're confident will last the three years) has a lot of positive points.