Third-party payments
If a client cannot make a contribution from their income for a trust deed, it is possible that a third party can contribute for them – eg, a friend or family member. The third party should not be subject to an insolvency or debt arrangement themself.
The trustee makes a payment agreement with the third party. This agreement may not be enforceable and, in the event of non-payment, the third party cannot be forced to pay. The trustee must inform the creditors if this is the case. The trustee should also advise the third party to take independent legal advice.
Where the agreement is unenforceable, it may lead to the creditors refusing protected status.
If the third party stops paying, and any third-party agreement is unenforceable, the PTD fails, and the client will be made bankrupt or be stuck in limbo in the PTD (see
here).
This could be useful where a trust deed would be a clear solution for the client but they cannot afford it. Take advice before considering this option.