The Debt Arrangement Scheme (DAS) is a Scottish government-backed initiative offering a structured repayment plan for individuals facing unmanageable debt. By setting up a Debt Payment Plan (DPP), the DAS offers an affordable way to repay creditors without the threat of legal action.
When you’re dealing with debt stress, it’s nice to know there are solutions in place to help you deal with the worst of your unaffordable debt. The Debt Arrangement Scheme (DAS), supported by the Scottish Government, is one such solution.
This article will explore how the Debt Arrangement Scheme works, who qualifies for a DAS, and the advantages and disadvantages of using this particular debt solution as a structured pathway towards financial stability in Scotland.
The Debt Arrangement Scheme (DAS) is a government-backed debt management program in Scotland designed to help individuals struggling with unsecured debts.
Through DAS, you can consolidate multiple debts into a single affordable monthly payment plan. This plan is based on your ability to pay, which is assessed by a money advisor. You will make a series of fixed monthly payments to creditors you owe money to, who are legally bound to freeze interest and charges included debts.
The DAS provides a structured and manageable approach for individuals to repay their debts over an extended period, offering financial relief without resorting to more drastic measures like bankruptcy.
To qualify for the Debt Arrangement Scheme (DAS) in Scotland, individuals must meet certain criteria. Firstly, applicants must reside in Scotland and have one or more debts that they are struggling to repay.
DAS is primarily designed for those with unsecured debts, such as credit cards and personal loans, rather than secured debts like mortgages. Additionally, individuals applying for DAS must seek the assistance of an approved money advisor who will assess their financial situation to ensure that they can afford the proposed monthly payments.
You also need to have a reasonable surplus income after meeting essential living expenses to contribute towards the repayment plan. You should always check with a debt adviser or debt charity to gauge your suitability for a formal debt solution like the Debt Arrangement Scheme.
Debts eligible for inclusion in a Debt Arrangement Scheme (DAS) are mostly unsecured debts, like credit card balances, personal loans, and overdrafts.
Examples of unsecured debts eligible for inclusion in a Debt Arrangement Scheme (DAS):
Secured debts, like mortgages or car loans, can’t be included in the Debt Arrangement Scheme. Secured debts involve collateral, and the creditor has a legal claim to the asset in case of non-payment.
Examples of secured debts that must be excluded from a Debt Arrangement Scheme (DAS):
If you enter the Debt Arrangement Scheme while having existing secured loans, you will be expected to continue the repayment of those loans, although this will be taken into consideration by your money adviser when deciding how much you can reasonably afford to pay towards the DAS each month.
Before moving forward with any debt solution, you should always weigh the pros and cons of that solution against your specific financial circumstances.
We’ve highlighted some of the key advantages and disadvantages of the Debt Arrangement (DAS) below.
Applying for the Debt Arrangement Scheme (DAS) involves a series of specific steps, from making the initial application to working with a DAS-approved money adviser. We've highlighted the key steps in the application process below.
To protect yourself from legal actions by creditors during the DAS application process, you can apply for a temporary moratorium on your debts. This period offers a respite, giving you time to set up the necessary arrangements without facing immediate legal consequences for your unpaid debt.
You might want to engage the services of a reputable debt management company to guide you through the DAS application.
The cornerstone of this process is a money adviser who will assess your financial situation, helping you determine the most suitable course of action, and most reputable debt management companies have in-house money advisers who can support you.
Your money adviser is a professional who is equipped to evaluate your financial situation objectively, taking into account your income, expenses, and outstanding debts. Their expertise ensures that your proposed Debt Payment Programme (DPP) is realistic and sustainable.
You will collaborate closely with your money adviser when working on your DAS application. Not only will they ensure your proposed payment plan is affordable, they also play a vital role in liaising between you and your creditors later in the process, presenting a realistic and fair repayment plan and negotiating on your behalf.
Once you have your application ready, it needs to be submitted to the Accountant in Bankruptcy (AiB) for approval. The AiB is the government body responsible for overseeing insolvency processes in Scotland, and they will review your application and make sure everything is in order.
After submitting your DPP, your creditors will review the proposal. The success of your application hinges on the approval of the majority of your creditors. While not all creditors need to consent, a significant proportion must agree for the DPP to proceed.
Upon receiving creditor approval, it’s time to adhere to the terms outlined in your approved Debt Payment Programme. As long as you make the agreed-upon monthly payments to your money adviser each month, they will distribute the funds to your creditors accordingly.
The duration of Debt Payment Programmes (DPPs) under the Debt Arrangement Scheme (DAS) varies based on individual circumstances. The length of the DPP is influenced by factors such as the total amount of debt owed and your level of disposable income.
The Debt Arrangement Scheme is designed to create realistic and sustainable repayment plans that ensure you can meet your financial obligations without undue hardship. While some DPPs may extend over a shorter period, others with higher debt amounts or limited disposable income may require a longer timeframe for repayment.
The flexibility in tailoring DPP durations to individual financial circumstances is a key feature of DAS. A debt adviser will be able to offer guidance on whether this approach is the best way to resolve your unique debt problems.
Enrolling in the Debt Arrangement Scheme (DAS) will impact your credit rating for as long as your Debt Payment Programme (DPP) lasts.
As long as you are in the DPP, it will be listed on your credit file. This information will be available to creditors, credit reference agencies, and future lenders, potentially making it more difficult to secure credit, be accepted for mortgages or loans, or open a new bank account.
The implications of DAS on your credit rating are dependent on your commitment to, and successful completion of, the DPP. The temporary negative impact should gradually improve over time as long as you complete the arrangement, but you should always seek professional advice before entering the scheme.
If your financial situation improves during your Debt Arrangement Scheme (DAS), it is possible to pay off the scheme early.
In the event of a positive change in your circumstances, or if you come into a lump sum of money, you can use that amount to clear your remaining balance under the DAS.
Make sure you inform your DAS-approved adviser of any changes in your financial situation during the arrangement. They can provide guidance on the best course of action and support you through the early settlement process.
While the Debt Arrangement Scheme (DAS) is a valuable debt management solution in Scotland, various alternatives cater to diverse financial circumstances. Each option offers unique advantages, and selecting the most suitable one depends on individual preferences and situations.
Here are some alternatives to Debt Arrangement Schemes:
A Trust Deed is a formal agreement between you and your creditors, facilitated by a Trustee. This legal process typically lasts for four years, during which you make an affordable monthly payment based on your financial capabilities.
After the agreed period, any remaining debt included in the arrangement is usually written off, providing a fresh financial start. Trust Deeds are particularly beneficial for people with significant unsecured debts and a regular source of income that allows them to afford a monthly contribution towards their debts.
The Minimal Asset Process (MAP) is a form of bankruptcy in Scotland designed for individuals with low income, limited assets, and debts below a certain threshold.
The MAP bankruptcy process typically lasts for six months, after which most remaining debts are discharged. MAP is a swift and relatively cost-effective option for those with fewer financial resources who find themselves struggling with debt.
Sequestration is the Scottish equivalent of bankruptcy, available to individuals struggling with unmanageable debt. It involves surrendering assets to a Trustee, who oversees the distribution of available assets among creditors. After a designated period, usually one year, all remaining eligible debts are discharged.
Sequestration provides a formal and court-approved process for debt relief but has a serious impact on credit ratings and personal assets like homes and cars, so it's usually considered as a financial las resort.
Debt Management Plans are available in England and Wales and offer an informal agreement between you and your creditors.
Through a DMP, you negotiate lower monthly payments with creditors, making it more manageable to repay your debts. While DMPs don't provide legal protection, they offer flexibility and are suitable for people with lower debt amounts and a reliable income who may need more time to repay what they owe in full.
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