What is a Debt Arrangement Scheme (DAS)?
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If you live in Scotland and you’re feeling the pressure of debt, you may be interested in hearing more about the Debt Arrangement Scheme – or ‘DAS’ for short.
A Debt Arrangement Scheme is a way of paying off a number of debts through a Debt Payment Plan (DPP) – one single affordable monthly payment.
As soon as you begin a DAS application, the companies you owe money to (your ‘creditors’) will have to stop any debt recovery action they’re taking against you. This can make a DAS a useful way of repaying what you owe and easing your debt-related stress.
Here, we’ve explored the Debt Arrangement Scheme in more detail. This way, you’ve got all the information you need to decide if a DAS could be right for you – and how to apply if so.
In a nutshell, a Debt Arrangement Scheme helps you gather together all your unsecured debts so that you can work on paying them all off with just one monthly payment.
To make sure you can afford the monthly payment, the debts will usually be stretched over a longer repayment term. Don’t worry though; because the repayment plan set up through a DAS is a government-approved ‘formal’ debt solution, it means your creditors can’t chase you for what you owe or take any legal action against you.
Like IVAs and Bankruptcy in England – or a Trust Deed or Sequestration in Scotland, a DAS freezes any interest or additional charges on your debts. This means that even if the repayment term increases significantly, you won’t end up paying off more than you currently owe.
How does a Debt Arrangement Scheme (DAS) work in Scotland?
The Debt Arrangement Scheme was set up by the Scottish Government to help people in Scotland tackle their debt without the threat of legal action from their creditors.
A DAS stops this legal action because it’s a ‘formal’ debt solution. This means that when it’s set up, the people you owe money to make a legally-binding agreement to stick to the terms that are laid out.
As a result, they will not add any additional charges or interest, and they will stop any action they’re taking to recover money you owe.
The Debt Arrangement Scheme is based around setting up a Debt Payment Programme (DPP) as an agreement between you and your creditors. Because a Debt Payment Programme is the legally-binding part of the process, it must be set up by an approved money adviser – known as a DAS Approved Adviser.
The money adviser you choose will arrange a repayment plan that satisfies your creditors and is affordable for you.
How long does a Debt Arrangement Scheme last?
The Debt Payment Programme that’s set up through the DAS doesn’t have a set timescale. Instead, it will run for however long it takes to pay off what’s owed.
This means that your creditors won’t have to write any of the debt off. Instead, they’re really just agreeing to smaller payments over a longer period of time.
If you’d prefer to explore solutions that might write off a large portion of your debt, you may decide that a Trust Deed or Sequestration would better suit you needs.
Do I qualify for a Debt Arrangement Scheme (DAS)?
As long as you live in Scotland and have some amount of unsecured debt, you could be eligible for a DAS.
Unlike some other debt management schemes (such as a Trust Deed), there’s no minimum amount of debt required to qualify.
However, since the DAS and the Debt Payment Programme (DPP) that’s involved are legally-binding ways of dealing with debts, you will need advice from an approved professional to make sure it’s the best option for you.
Unfortunately, if you are subject to sequestration, bankrupt, subject to a bankruptcy order, or in a protected Trust Deed, you cannot apply for a DAS.
What debts can't be included in a Debt Arrangement Scheme (DAS)?
Like a Trust Deed, it is generally only ‘unsecured’ debt that can be included in a DAS – so you will not usually be able to include any ‘secured’ debt.
Secured debt includes the following:
- Mortgages (where you still live in the house)
- Hire Purchase Agreements (where you still own the car/item)
- Car PCP agreements (where you still own the car)
That said, in some cases it is possible to include mortgage arrears. If you’re struggling with debts and one of your creditors is your mortgage company, our advisers will be able to explore whether or not this can be included.
It’s also worth noting that certain court debts and student loan debts cannot be included in a DAS arrangement either. You will need to continue to make payments towards these debts as well as pay your DAS.
How much does a Debt Arrangement Scheme (DAS) cost?
If you know anyone with a DAS or you’ve done some research online, you might see information about application charges and maintenance charges – but don’t worry.
New regulations came into force in November 2019 that say you cannot be charged anything for the setup or maintenance of your DAS.
Some websites are still a little bit behind these changes, but you can be 100% confident you’ll always be reading the latest information here.
How long does it take to setup a Debt Arrangement Scheme (DAS) in Scotland?
There’s no exact amount of time it will take to set up a DAS – but it usually takes between 4-6 weeks to go from your first chat with an adviser to the point where the scheme is set up.
The start of the process is usually fairly quick; you’ll explore what you can afford to pay with an adviser, then they’ll make an application for a DPP. Part of the DPP application process involves sending information about how much you can afford to repay to each of your creditors.
They are given 21 days to respond – if they don’t, it’s assumed they agree and the application continues.
If any of the companies you owe money to object to the proposal, the government-appointed DAS Administrator (also known as The Accountant in Bankruptcy) will review your case.
This can add a little more time, but as long as they decide it’s a reasonable request, they will authorise it – even if your creditors object.
Does a Debt Arrangement Scheme (DAS) affect my credit rating?
A DAS will damage your credit score. However, this isn’t necessarily the worst thing that can happen – as the situation could be much worse if your debt spirals out of control and you end up facing individual legal proceedings from the people or companies you owe money to.
A DAS damages your credit rating because it will be recorded on a public register and credit referencing agency will be notified.
Also, since you will no longer be making the payments you had originally committed to, the companies involved will also report this to credit referencing agencies.
Since the Debt Arrangement Scheme is designed to help people who are already struggling to make their monthly payments, there’s a good chance your credit rating will already have been damaged. When your DAS payment programme is finished, you’ll be able to begin rebuilding your credit score.
Does a DAS stop me getting credit in the future?
This type of Debt Arrangement solution and the Debt Payment Programme (DPP) that’s involved may make it more difficult to get credit while they’re in force.
As well as the damage to your credit rating that we’ve already covered, you will have to let potential creditors know if you borrow more than £2,000. Alternatively, if you’ve already borrowed £1,000 – you’ll then have to let creditors know when you borrow any amount.
Your DAS and the payment plan will be recorded on your credit file for six years. After that, there will be no record of the arrangement held – so you can work on improving your credit score again.
How do you apply to enter the Debt Arrangement Scheme in Scotland?
Since this type of debt scheme is a ‘formal’ (legally-binding) government-approved money management process, you need an Approved Money Adviser or Insolvency Practitioner to help you apply.
The professional who helps you will decide whether the scheme is suitable for you – if it is, they will take a detailed look at your finances to work out how much you can afford to pay towards your debts each month.
This conversation will always be confidential, even if you decide not to go ahead with the application.
If you do decide to go ahead with an application, your adviser will put together all the information needed to apply for the DPP. This will include a proposal which is sent to all your creditors. Changes to the rules around the scheme mean only creditors who are owed more than 10% of the debt can object.
They have 21 days to do so – as long as the government’s Accountant in Bankruptcy decides your application is a reasonable way to pay off your debts, it will go ahead.
When your application is approved, your name will be recorded on the DAS register and your adviser will talk you through setting up your monthly payment. Like with a Trust Deed, they will handle distributing the money to the various creditors – so you don’t have to worry about that.
At this stage, all your interest, fees, penalties, and any additional charges on your debts are frozen, and the companies you owe money to can no longer take any recovery action or take you to court.
Pros and cons of a DAS
Like any debt solution, there are some pros and some cons associated with a Debt Arrangement Scheme and the Debt Payment Programme that would be set up for you.
We’ve listed some of those advantages and disadvantages here, so you can decide whether a DAS is something you’d like to explore in more detail:
Advantages of using a Debt Arrangement Scheme
- You will only have to make a single payment towards your Debt Payment Programme. Your money adviser will help calculate this amount and it will always be an affordable amount.
- When approved, the DAS will make sure all interest and charges are frozen – so the amount you owe will not increase.
- The DAS will mean you’re protected from companies demanding money or threatening to take you to court.
- You will not have to communicate with your creditors when the DAS being setup or when it comes into force. This can enormously reduce debt-related stress.
- If you have any wage arrestments in place, these will be stopped.
- You will be protected from any legal action your creditors could otherwise take against you.
- The amount you pay is flexible – so if you circumstances change, you may be able to have the amount reduced, or you may have it increased so you’re debt free sooner.
- You will not be expected to sell your home, car, or any other possessions to help toward your debts.
- You will not be expected to release any equity you have in your home or other properties.
- You can apply for a payment holiday of up to 6 months if you’re struggling to pay – or two payment breaks of a month during any year.
- Even if creditors don’t accept the proposal – they can be forced to agree if it’s decided that the arrangement is ‘fair and reasonable’.
Disadvantages of using a Debt Arrangement Scheme
- A Debt Arrangement Scheme and the Debt Payment Programme involved may take longer to pay off compared to some other debt solutions.
- You will not have any debts written off – you will pay everything you owe back, just at an affordable rate with no additional fees or interest.
- Your credit rating could be badly affected.
- If you don’t stick to your Debt Payment Programme, the conditions of the DAS could be revoked and your creditors could begin action against you again.
- It is only available to people living in Scotland for at least the last 6 months. If you do not live in Scotland, you will need to explore another debt management scheme.