Comparing Debt Arrangement Schemes and Trust Deeds
Both Debt Arrangement Schemes (DAS) and Protected Trust Deeds are debt solutions available to residents of Scotland. There are advantages and disadvantages to both, so if you’ve heard a little about them it’s worth exploring the both in a little more depth to consider which would be most suitable for your situation.
What do the two solutions involve?
A Debt Arrangement Scheme (DAS) allows an individual to repay their debts in full over an extended period of time. To do so you must have some level of spare income to pay toward those debts after covering living expenses and if so, you could qualify to stop any further charges and interest on those debts – as well as halting any legal action being taken against you.
A Protected Trust Deed is a voluntary agreement between a you and your creditors. It means you can agree an affordable monthly payment that will repay all or part of the money you owe. A trust deed, when established and protected is legally binding – and therefore any unsecured creditors cannot add contractual interest or charges to the outstanding debt.
Who would use a DAS?
A DAS is often favoured by home owners with large amounts of equity as it protects from bankruptcy – however, it’s important to remember that a mortgage payment still needs to be made each month. Occasionally, people with small amounts of debt (Under £5,000) will favour a DAS as it could allow for the debt to be paid more quickly than with a Trust Deed.
Advantages of a DAS
1. Debts are repaid in manageable amount
2. Creditors don’t have to agree to it
3. Any additional charges, interest and action by bailiffs and debt collectors is halted
Disadvantages of a DAS
1. The debt still needs to be paid in full (excluding any interest that would have been applied after the DAS is set up)
2. The amount is equivalent to that of a Trust Deed – but is paid until the debt is clear
3. Setting up a DAS will register a default on each loan
4. Still shows on person’s credit file for 6 years beyond repayment date
5. No spare cash until the DAS is fully paid off
6. Potentially longer impact on credit history vs. TD
Who would use a Trust Deed?
A Trust Deed is often a more suitable solution for individuals with unsecured debts over £5,000 who wish to be clear of that debt within 4 years.
Advantages of a Trust Deed
1. An advisor will help you come to affordable monthly payment considering your circumstances.
2. It is legally binding, so creditors will never increase the amount or add charges.
3. You’re usually only paying back over 48 months.
4. Fresh start at the end of the term.
5. While you are paying, your assets (home, car, etc) are protected and can’t be seized to pay toward debt.
Disadvantages of a Trust Deed
1. A Trust Deed is only available in Scotland (In England, Wales and Northern Ireland you may be eligible for an IVA)
2. It is only feasible if your unsecured debt is over £5,000
As you can see, there are pros and cons to both approaches. If you think a DAS or Trust Deed might be the solution you’re looking for it is important that you get the correct debt help & advice. At Creditfix you’re always talking confidentially to advisors who understand the impact your financial worries can have and can discuss the options available to you.