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What is the Debt Arrangement Scheme?

Qualifying Criteria for DAS in Scotland

 

How Do You Apply?

 

Moratoriums

 

Advantages of Debt Arrangement Schemes

 

 

Negatives of DAS

 

1. No debt write-off

2. May run for a long time to repay the debts in full

3. Your credit rating gets damaged

4. You cannot obtain new credit without permission

5. Interest can added back if your DAS fails

6. Your personal details added to a public register

7. If your DAS fails you will remain liable for the balance of your debt

8. Paying a fee for DAS will extend the plan’s term

9. Your personal expenditure gets restricted

10. Mortgages may be harder to obtain or on unattractive terms

11. You stop directly paying your creditors. It is likely that you will fall into arrears (or your arrears will increase).

 

Who Uses The Debt Arrangement Scheme?

 

Many homeowners use DAS. If you have equity in your home, trust deeds or bankruptcy may be unsuitable. DAS takes no account of your assets.

 

This option may also be suitable if your debts aren’t huge. Removing interest means debt can be repaid sooner. Payments in trust deeds (or bankruptcy) last for four years. Some people can repay their debt faster than this by using DAS.

 

You may prefer DAS if you want to repay your debts in full. Trust deeds and bankruptcy typically result in debt write-off. DAS will result in your creditors receiving (almost) full repayment.

 

You might have insolvency restrictions in your employment contract. Unlike bankruptcy or a trust deed, DAS isn't insolvency. It protects you legally from your creditors, which might be important.

 

Do you expect to receive a lump sum (or property) in the future? In DAS you can use this as you choose. In bankruptcy or a trust deed, you must hand it over.

 

Fees

 

There are two options for accessing the Debt Arrangement Scheme:

 

Fee-free: You pay no fee for the advice and support that you receive. Citizens Advice provides a fee-free service, for example.

 

Fee-charging: You pay a fee for advice and support. This fee gets taken from your regular payment. Insolvency practitioners may offer you a fee-charging service.

 

Switching From a Debt Management Plan

 

Many Scottish residents use informal debt management plans. Debt management works like DAS. You pay back the amount that you can afford, until your debts get cleared.

 

Debt management has three major weaknesses in comparison:

 

1. No formal legal protection from creditors

2. No guarantee that interest and charges will stop

3. No power to deal with an objecting creditor

 

Potential advantages of debt management in comparison to DAS:

 

1. No entry on a public register

2. Expenditure restrictions may be less rigid

3. Less restrictive in general

 

Switching From DAS to a Trust Deed

 

You can switch from the Debt Arrangement Scheme to a trust deed.

 

This may be attractive if your DAS term is long. Some last for ten years or more. A year or two later, the finishing line may still seem very distant.

 

You may have reduced your DAS payment. This means that it will last longer than expected. A trust deed runs for a minimum period of four years, which may be shorter.

 

How do you switch? The first step is to take debt advice. Check that you qualify for a Scottish trust deed. Trust deeds aren’t right for everyone. Creditors won’ accept them every time.

 

A switch is likely to deliver a mixture of benefits and drawbacks. The adviser can identify these (and any risks) to you. You can make an informed decision about switching.

 

What happens to your Debt Arrangement Scheme? It gets cancelled when you proceed with a trust deed. You must therefore be certain that this change is right for you.

 

Who can help you to switch? Contact our advice team to check if a change makes sense. We can connect you to reputable trust deed providers.

 

Author: Andrew Graveson

Qualified Debt Adviser & Trust-Deed.co.uk Founder

 

Page last updated: 25/02/2019

 

 

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(c) Channel Active Limited. Company Number: 06412452. Data Protection Registration: Z1332750.

Telephone calls may be monitored or recorded. Authorised and regulated by the Financial Conduct Authority.

Trust-Deed.co.uk, Clyde Offices, 2nd Floor, 48 West George Street, Glasgow, G2 1BP. Tel: 0141 2490416.