The Debt Arrangement Scheme (DAS) is a way to manage unaffordable personal debts which has been made available to residents of Scotland by the Scottish Government.
It provides you with debt and general financial advice and presents you with additional time to repay your debts. Unlike an informal debt management plan, the DAS Scheme provides you (and therefore your home also) with legal protection from your unsecured creditors. This prevents them from taking legal recovery action against you. It also stops further interest from being added to your debts.
Why was it introduced?
The scheme was originally created as a response to the problems caused by growing levels of personal indebtedness around Scotland. The Scottish Executive (as it was then) acted to provide an extra layer of assistance for those that needed to deal with debt problems.
The Debtors (Scotland) Act of 1987 provided a couple of measures that could potentially halt creditor legal debt recovery action. These were ‘Time To Pay Directions’ and ‘Time To Pay Orders’. However, the scope of these options (which only applied to single debts) and the fact they had to be obtained from the courts, made them of limited value to individuals with multiple problem debts.
The DAS Scheme was introduced to fill this perceived gap. It enables individuals (and couples) to obtain time to repay their debts without having to go to the courts.
Who might it appeal to?
The scheme may be of particular interest to those looking for Scottish debt help who are considering starting a protected trust deed, but who realistically will not be able to release the equity that exists in their home. Unlike a Scottish trust deed, the DAS does not require you to pay over the value of assets such as the equity in your home or a moderately valued vehicle.
The scheme may also appeal to anyone who has the ability to fully repay their debts if they could only stop interest and charges mounting up so quickly. Interest and charges will no longer be added under Debt Arrangement Schemes, provided the individual (or couple) stick to the arrangements made.
Many people would prefer to fully repay their debts if it were possible. This is unlikely to be the case in a protected trust deed or bankruptcy (sequestration). The DAS enables people to reschedule their debt repayments so their debts can be fully repaid at a rate that they can afford.
Who is eligible?
You may be eligible if you are resident in Scotland, have personal debts which you cannot afford to repay at the contractual rates, but have some spare income available that can be used to service your debts by paying into the scheme.
You will not be eligible for the DAS Scheme if you are currently bankrupt, are in a protected trust deed from which you have not been discharged, are currently subject to a Bankruptcy Restriction Order or Undertaking, or in some circumstances where you are paying your debts under a conjoined arrestment order (seek advice if this is the case as there are exceptions in some circumstances).
How does the scheme work?
The Application Process
To apply you must do so through an Approved Money Adviser or Insolvency Practitioner. Your nearest local approved adviser can be found via the DAS Scotland website.
DAS Approved Money Advisers working for the CAB or Local Authorities are unlikely to charge a fee for their assistance and advice. Other approved money advisers work commercially (including Insolvency Practitioner firms) and may charge for their services. You should check this with your chosen money adviser prior to entering into any formal agreement and ensure you understand the financial basis of your relationship with them.
Your Approved Adviser will assess your situation and ask you to provide proof of your financial circumstances. If you are suitable for the scheme, the Money Adviser will apply on your behalf once you provide them with permission to do so (following the initial advice process). The details of your proposal will be sent to all of the creditors you wish to include. Each creditor will be given the opportunity to agree or disagree with the proposed arrangements.
Depending on your individual circumstances, your Money Advisor may suggest that you ‘intimate’ to the Debt Arrangement Schemes Administrator that you intend to apply. This will give you protection from legal action by your creditors for a period of up to six weeks while everything is getting worked out and the scheme is being set up. This could be important if some of your creditors are taking legal action against you or threatening to do so.
If all of your creditors agree, or have deemed to agree by not objecting to your proposal, then your DAS Scheme will be approved. If there are any objections then the Administrator will decide whether the scheme should be approved. There are situations where “unreasonable” creditor objections may be overruled.
Benefits of the scheme:
You are protected from further legal action by your unsecured creditors;
Current diligences (like a wage arrestment) must stop being enforced;
Your creditors cannot bankrupt you;
Interest costs (and other penalty fees) will be stopped from the date of approval and fully waived when the term of the scheme is complete;
Pressure from creditors will be lifted and you’ll have support from your adviser;
Your home will be protected providing you keep up your debt repayments and mortgage/rent payments;
The scheme has the flexibility to be amended if your circumstances change (for the better or the worse).
Your debts will usually need to be fully repaid. In some circumstances this can result in a longer repayment schedule than other debt solutions (like a trust deed);
As with most debt solutions, your credit rating will be negatively affected by the Debt Arrangement Scheme. Please see our “Credit Rating” page for further details;
This form of Scottish debt help should be considered to be a “formal” debt solution. In some instances it may be unsuitable for individuals seeking greater levels of flexibility than it provides;
Interest may be re-added to the debts if you fail to complete the scheme;
During the period of the scheme you cannot use further credit without receiving prior approval.
Potential disadvantages of the scheme
Creditors have the option to object to the establishment of your Debt Arrangement Scheme. If this were to occur, your case would be assessed by the AIB using a “fair and reasonable” test to determine whether it can proceed or not.
A mortgage obtained during the terms of the scheme (if you can obtain one) is likely to be on less favourable terms than might otherwise be achieved (for example the interest rates may be higher).
Your expenditure during the period of the scheme will be restricted to enable a fair payment to be made towards your debts. Should the scheme fail it is possible that interest and charges will once again be added to your accounts.
DAS will have a significant effect on your credit record. It might also need to be declared on mortgage applications once completed (even if it is no longer visible on a credit record) depending upon the view taken by any particular mortgage lender.
Michael McGowan is a Debt Arrangement Scheme Approved Money Adviser who works for Henderson Loggie. Michael can provide expert advice and help you to set up a DAS Scheme to deal with your debts. He covers the whole of Scotland geographically.
As a professionally qualified debt advisor, Michael is also able to provide Scottish debt help with other resolution options including a Scottish trust deed. If you would like to speak with Michael, please complete the form below. Michael can also answer your questions in our Scottish trust deed forum which you are also welcome to use as a forum to discuss all aspects of the debt arrangement scheme.
Michael McGowan is a Debt Arrangement Scheme Approved Money Adviser who works for Henderson Loggie. Michael can provide Debt Arrangement Scheme advice and can help you to set up a DAS Scheme to deal with your debts. He covers the whole of Scotland geographically. As a professionally qualified debt advisor, Michael is also able to advise you on other debt resolution options including a Scottish trust deed. If you would like to speak with Michael about the Debt Arrangement Scheme please complete the form below. Michael can also answer your DAS Scheme questions in our Scottish trust deed forum which you are welcome also to use as a Debt Arrangement Scheme forum.