What Happens to Your Home?

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The Equity Question

When you enter a Protected Trust Deed, your Trustee is required to consider any equity you hold in your home. Equity is the difference between your property's current market value and the amount outstanding on your mortgage.

For example, if your home is worth £180,000 and you have £160,000 left on your mortgage, you have £20,000 of equity.

Will You Have to Sell Your Home?

In the vast majority of cases, no - you will not be forced to sell your home in a Protected Trust Deed. This is one of the key differences from sequestration (bankruptcy), where asset sale is more common.

However, your Trustee is required to release any realisable equity for the benefit of creditors. This is typically addressed in the final year of your Trust Deed.

How Equity Is Usually Handled

• Little or no equity: If your equity is small (typically under £5,000 - £10,000, depending on costs), your Trustee may agree it is not cost-effective to pursue and may waive the equity requirement.
• Remortgaging: You may be able to release equity by taking a new mortgage or extending your existing one to release funds to your Trustee.
• Extended payment term: If you cannot remortgage, your Trustee may agree to extend your Trust Deed payments by up to 12 months as an alternative to releasing equity.
• Third-party payment: A family member or friend can sometimes pay a lump sum equivalent to the equity to your Trustee, allowing you to retain full ownership.

Negative Equity

If your mortgage is worth more than your property's value (negative equity), there is no equity to release and this part of the process will not apply to you.

Continuing Your Mortgage Payments

Your mortgage is a secured debt and is not included in your Trust Deed. You must continue paying your mortgage independently throughout the process. Your monthly Trust Deed payment is calculated based on your disposable income after essential living costs including your mortgage.

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