The Debt Arrangement Scheme (which is also often known as DAS) is a straightforward way to manage unaffordable unsecured personal debts. It is a formal scheme which has been made available to residents of Scotland by the Scottish Government. It does not exist elsewhere in the UK.
DAS firstly provides you with professional debt advice and can then provide you with additional time to repay your debts. It might also provide you (and therefore your assets, such as your home) with legal protection from your unsecured creditors. This prevents lenders from taking legal recovery action against you. It also stops further interest from being added to your debts. Neither of these incredibly important benefits can be guaranteed by using an informal debt management plan.
If you’re a homeowner with equity (or if you own other significant assets) this scheme may be of particular interest to you. Unlike a Scottish trust deed or sequestration (bankruptcy), this type of debt plan does not require you to pay over the value of significant assets that you own. In fact, the legal protection that the scheme offers may protect assets that might otherwise be vulnerable to creditor action.
The scheme could also appeal to anyone who could fully repay their debts if they could only stop their creditors from adding so much interest and charges. Once a Debt Arrangement Scheme has been accepted by creditors (or imposed upon them where necessary) interest and charges can no longer be added,provided that you stick to the agreed terms.
Debt advisers often hear from clients that they’d much prefer to fully repay their debts if it were possible to do so. In most instances this full repayment outcome will not result from entry to protected trust deeds or sequestrations. A formal debt arrangement planeffectively enables people to reschedule their debt repayments in a way that is affordable over a period of time.
Debt Arrangement Schemes arenot personal insolvency. Certain types of employment might be affected by entry into personal insolvency but remain unaffected by this option.
You’ll need to be resident in Scotland, have personal debts which you cannot afford to repay (at the full contractual repayment rate) and have some spare income available to pay towards your debts on a monthly basis. Your creditors will need to agree to your scheme repayment proposals (or to have the proposals imposed upon them by an impartial person if necessary).
You’ll need to be able to fully repay your debts in a “reasonable” period of time. This calculation is based upon how much you owe in total and how much you can pay each month. If the anticipated repayment period is deemed to be excessively long you may need to consider personal insolvency (a trust deed or bankruptcy) instead.
You’ll not be eligible if you are currently bankrupt, if you’re already in a trust deed from which you have not been discharged, if you’re subject to a Bankruptcy Restriction Order or Bankruptcy Restriction Undertaking, or perhaps if you are paying your debts under a conjoined arrestment order (seek professional advice if this is the case as there may be exceptions).
To apply to enter a Debt Arrangement Scheme you must first approach an Approved Money Adviser, or an Insolvency Practitioner that handles this specialist type of work.
Your adviser will assess your current financial situation with you. You may be asked to provide certain types of documentary evidence such as payslips, bank statements and creditor statements or letters.
If you are eligible forthe scheme, it’s suitable for your needs, and you wish to proceed, the adviser can make an application on your behalf. The details of your new repayment proposals will then be sent to all of your unsecured creditors.
Each creditor is given some time to decide whether to consent or object to your repayment proposals. If you’re already subject to legal action or threats, your adviser can usually ensure that you remain protected from them during this set-up phase.
If all of your creditors agree to your DAS proposals, or have been deemed to agree (by not replying at all) then your proposal will become approved and binding upon all parties.
If any of your creditors object there remains the possibility that their objections will be rejected and the scheme approved anyway. This would apply, for example, if the grounds for the objection were deemed by an impartial person (see below) to be unreasonable.
You are protected against further legal action from your unsecured creditors;
Current diligences (like a wage arrestment) must stop being enforced;
Your creditors cannot bankrupt you;
Interest costs (and other penalty fees) can be stopped provided you stick to the agreement.
Pressure from creditors will be removed and you’ll have the support of your adviser;
Your home will be protected (provided that you stick to the agreement and make your full mortgage payments);
The scheme is flexible to accommodate changes in your circumstances in the future. Payments can usually be increased or decreased if things change.A payment break might be granted if there is a temporary need which can be evidenced.
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 Scottish trust deedscheduled over a four year period for example);
As with most debt solutions, your credit rating will be negatively affected by the Debt Arrangement Scheme;
This form of debt assistance should be considered to be a “formal” debt solution. Some people might be uneasy regarding formal requirements to increase payments if, for example, your circumstances were to improve;
Interest may be re-added to the debts if you fail to complete the scheme;
While in DAS you cannot use further credit without receiving prior approval.
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 (including Insolvency Practitioners) work on a commercial basis and charge for their services. You should check the basis of any charges with your chosen money adviser prior to entering into any formal agreement. Take the time to ensure you understand the financial basis of your relationship with them as it may affect how long it will take to fully repay your debts.
If you prefer to use a local adviser, you can locate Approved Money Advisers in your area here.
As mentioned previously, your 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 “Accountant InBankruptcy”(Scotland’s Insolvency Service) using a “fair and reasonable” test. This will determine whether your proposals are finally approved and imposed upon any objecting creditors.
A public register of Debt Arrangement Schemes is kept.
When you cease making payments directly to your creditors (which will often be at the point when you commit to going ahead with DAS) it is likely that you will fall into arrears or your arrears will increase. During the arrangement itself, distributions from your contributions are likely to be made to your creditors regularly by the appointed payment distributer.
A significant amount of your payments into a commercially-provided schememight be taken to meet fees. If your arrangement subsequently fails you will remain liable for the balance of your debt and any fees and costs already incurred.
A mortgage obtained during the terms of the scheme (if you can obtain one at all) is likely to be on less favourable terms than might otherwise be achieved. For example, the interest rates may be higher.
Debt Arrangement Schemes might conceivably have to be declared on mortgage applications once completed (even if it is no longer visible on your credit report) depending upon the procedures of any particular mortgage lender.
Your expenditure during the period of the scheme will effectively be restricted to enable a reasonable payment to be made towards your debts each month.
Our professionally qualified debt advisers can provide you with further information about the Debt Arrangement Scheme and all of the alternative options that exist. You can contact them easily here (via a contact form or directly by telephone).
Our advisers are also available to work through your financial circumstances with you. This enables us to provide you with tailored advice about how you can tackle your debts. Please get in touch with us if that would be helpful.
The firm represented in our forum by David Tannock provides DAS services on a commercial basis. If you’d like to discuss this option with them you can contact David here.