Although Trust Deeds can be a lifeline if you are in financial trouble, some of the rules of having one can be pretty tough to take. Until recently, one of the most restrictive rules was that if you wanted to obtain Protected status on your Trust Deed and prevent your creditors from sequestering you, ALL of your assets had to be given to your chosen insolvency practitioner (also known as a Trustee) for valuation and sale.
Those assets required included your home, although there were various ways the equity within it could be released. You could either remortgage or sell the property. Alternatively you could stay in your home if the Trustee was willing to consider other arrangements, such as a family member or third party paying a lump sum equivalent to your equity. Under those conditions, the Trustee would usually be prepared to forgo their interest in the property. The Mortgage to Rent scheme was also an interesting alternative and allow you to remain in your home.
But problems arose with those homes that had very little equity and were sold. Once all the sales costs were taken into account, the actual amount available to creditors was very little, but because of the rules a Trustee would have still have to sell it. Many people found themselves in this position, and some people refused to leave their homes under such circumstances. And then there were those who had bought their homes with former partners and friends. For obvious reasons, they were annoyed at the possibility of losing their asset for so little value to the creditors. For some, they point blank refused to allow the sale or re-mortgage and the Trustee reached deadlock.