Debt Arrangement Scheme
A Debt Arrangement Scheme is only available to residents in Scotland
If you’re struggling with unaffordable debt, you may have come across a debt solution called a Debt Management Scheme (DAS). But what exactly is a DAS and how can it help you deal with your problem debt?
A Debt Arrangement Scheme (DAS) is a legal debt management scheme first introduced by the Scottish Government in 2004 as a way to help people struggling to repay their unsecured debts.
This guide will cover everything you need to know about a DAS, including the various advantages and disadvantages, what happens if you don’t pay, and how long it stays on your credit file.
What is a debt arrangement scheme (DAS)?
A Debt Arrangement Scheme (DAS) allows you to pay off debts over an extended amount of time, while protecting you from any further action from the companies that are trying to recover the money they’re owed from you (your creditors). This is called a Debt Payment Plan or Debt Payment Programme (DPP).
A DAS is an alternative to a Trust Deed or sequestration in Scotland, and IVAs or bankruptcy in England. Like these solutions, it allows you to freeze the interest and charges on your debt and repay it over a period that suits you.
When you enter a DAS, your arrangement will be managed by the ‘DAS Administrator’, who is a government official responsible for approving Debt Payment Programmes and maintaining the DAS Register.
It’s duration depends on several factors, such as how much debt you’re in and how much you can afford to pay towards it each month.
There is no minimum or maximum level of debt needed to be able to enter into a DAS. Each company you are in debt to that are included in the scheme will receive regular payments towards the balance owed under legally binding terms you agree to at the beginning if your DAS.
Since new legislation was introduced in 2019, money advisers are no longer allowed to charge a fee to issue DPPs under the DAS. This means that you’ll never be asked to make any extra payments on top of your debt repayments.
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How does a Debt Arrangement Scheme work?
By entering a DAS, you commit to making one affordable payment into a DPP – usually on a monthly basis – which is then split among all the companies you owe money to.
It must be managed by an approved money adviser, who will represent you in all dealings with the people you owe money to, meaning you don’t have to communicate with them for the duration of your DAS.
The first step in the DAS process is your money advisor submitting a proposal to your creditors. They will then have 21 days to accept or reject the proposal. If there are no rejections or the rejections come from creditors who make up less than 10% of the total debt, it will automatically be approved.
If creditors who represent more than 10% of the total debt reject the proposal, the DPP can still be approved if the DAS Administrator deems it ‘fair and reasonable’.
During a DPP, it’s important to inform your money advisor of any changes to your financial situation as soon as possible.
In most cases, you should be able to vary your payments to allow you to pay more or less towards your debt as your circumstances require.
Am I eligible for a Debt Arrangement Scheme?
Because the DAS is a government programme, there are strict eligibility criteria you must meet before you can qualify.
Generally, you will qualify for a DAS if you:
- Live in Scotland
- Have one or more debts
- Have a reasonable amount of disposable income left after your outgoings to put towards your debt
- Are not bankrupt, subject to a Bankruptcy Restriction Order (BRO), or undertaking a Protected Trust Deed
- Have received advice from an approved money adviser
What debts can be included in a Debt Arrangement Scheme?
One of the benefits of a DAS over other debt solutions is that it allows a wider range of debts to be included.
Some of the debts you can include in a DAS include:
- Credit card debts
- Catalogue debts
- Payday loans
- Personal debts
- Store cards
- Overdrafts
- Council tax arrears
- Utility bill arrears
Most secured debts can’t be included in a DAS. This includes:
- Ongoing mortgage payments
- Secured loan payments
- Student loans
- Legal debts
For any secured debts not covered by the plan (e.g. your normal monthly mortgage payments), you must continue to make these payments during and beyond your DPP.
How long does a Debt Arrangement Scheme last?
There is no fixed length for a DAS – the amount of time you spend paying towards you DAS will vary depending on your circumstances.
That said, according to data from the Accountant in Bankruptcy (AiB), the average length of a DAS is six and a half years.
It’s unusual for a DPP to take longer than ten years. If you feel you would be unable to repay the money you owe in ten years or less, it could be worth investigating a Trust Deed as an alternative to a DAS. Trust Deeds come with the benefit of allowing you to write off some of your debt.
A DAS ends once you’ve made all the payments you originally agreed – whether through a monthly payment schedule or lump sum payment.
Can I pay off a Debt Arrangement Scheme early?
Because of how long a DAS can last, it’s common for a person’s financial circumstances to get better or worse at some point during their arrangement.
If your financial circumstances change at any point during your DAS, you should contact your DAS-approved money adviser for guidance in the first instance.
If, for whatever reason, you come into money during the course of your DAS, it is possible to pay the scheme off early by using the lump sum payment to clear your balance.
Once you’ve repaid all the money you owe, you will be released from the terms of your DAS and will be free to move on with your life.
How long does a Debt Arrangement Scheme stay on your credit file?
Unfortunately, any debt relief solution you use is highly likely to have a negative effect on your credit score.
The fact that you’re using a DAS will send a signal to lenders that you have struggled to pay back what you owe in the past, and may make them reluctant to offer you credit in the future.
Evidence of your DPP will remain on your credit file for a minimum of six years.
This is because your credit file contains the last six years of your credit history, and your DAS will usually last around six and a half years on average – meaning it is likely to be covered in your credit file.
Your credit file will show that you made reduced payments towards your debts throughout the course of your DPP, so the length of time your credit score will remain affected depends on how long it takes you to settle your payment plan.
Advantages & Disadvantages of a Debt Arrangement Scheme
Advantages
- You will only make a single monthly payment based on what you can afford
- An approved adviser will arrange payments to the companies you are in debt to so you don't have to
- A DAS will protect you from companies issuing demands or threatening court action
- The DAS is guaranteed to freeze all interest and charges on the debts included once approved
- It also guarantees legal protection from the creditors included once approved
- You can apply for a payment holiday of up to six months if for any reason you find it difficult to keep up payments towards your DAS
- A DAS is flexible so if your circumstances change you could be able to vary your payment amount to make it more affordable or to pay it off quicker if your situation allows
- Any wage arrestments that are already in place are stopped
- Valuable possessions you own will be unaffected, including your home, even if there's substantial equity in it
- Creditors who don't accept the proposals can be forced to comply with the arrangement if it's deemed to be ‘fair' by the administrator
Disadvantages
- Your credit rating may be badly affected
- If you don't comply with the conditions of the DPP, your DAS could be revoked – this means companies are free to pursue legal action against you, and reapply any interest, fees, and charges to what you owe
- A DAS doesn't allow you to write off any of your debt – you will only get relief from further interest, fees, and charges
- A DAS could take longer to pay off than other debt solutions
What happens if I stop paying a Debt Arrangement Scheme?
Like any debt solution, it’s important to stick to the terms and conditions you originally agreed on when you entered the DAS. If, for any reason, you stop making payments towards your DAS, you could face legal action.
It’s important to talk to your money adviser as soon as your circumstances change. They may be able to help you reach an agreement or vary your payments until they’re more in line with what you can comfortably afford.
One of the options they may offer is a ‘payment break’, which is a temporary pause on your payments until you get back on your feet.
The length of the payment break depends on the situation. For example, if your income has been reduced by 50% or more and is unlikely to improve, you could be awarded a payment break of up to six months.
Is a Debt Arrangement Scheme a good idea?
If you’re struggling with debt and looking for a way out, choosing a debt solution can be difficult. There are a range of options, and you always want to make sure you’re choosing the right solution for your situation.
The best debt solution for you is ultimately the one that best reflects your circumstances. That said, if you fit the criteria for a DAS, there’s every chance it’s the best way forward for you.
If you’re considering a DAS and want to know if it’s the right fit, reach out to a money adviser for free advice and to check if you qualify.
There are various Scottish debt solutions available – from a DAS to a Trust Deed – and the one you think you’re eligible for may not necessarily be the best option for you.
Is a Debt Arrangement Scheme a good idea?
If you’re struggling with debt and looking for a way out, choosing a debt solution can be difficult. There are a range of options, and you always want to make sure you’re getting the best deal.
The best debt solution for you is ultimately the one that best reflects your circumstances.
That said, if you fit the criteria for a Debt Arrangement Scheme, there’s every chance it’s the best way forward for you.
If you’re considering a DAS and want to know if it’s the right fit, check if you qualify here.
Frequently asked questions.
Need more info? Here are a few of our most frequently asked questions on this topic. If you don’t see the answer you’re looking for here, give us a ring – we’d love to help.
Once your arrangement has been approved, it is put on the DAS register. This is available to the public, so will likely have a negative impact on your credit score. Much the same as other debt solutions, it will show on your credit report for at least six years.
You apply for a debt payment programme (DPP) within a DAS, which allows you to pay back your debts in one affordable payment rather than lots of unaffordable ones.
You will make this payment for any reasonable length of time up to ten years. Once you have completed this, your debts will have been paid in full.
Yes. Once your arrangement has been approved, the companies included are not able to contact you or take any further action against you. Interest and charges are also frozen from the day it is approved and are written off when it has been completed.
You wouldn’t be able to include any of your secured debts in a DAS, such as your mortgage or any hire purchase agreements.
This solution is only available to those living in Scotland. There is no minimum or maximum amount of debt needed to be able to apply for a DAS, but you do need to be in debt to more than one company. You also must be able to afford to make a payment towards your debts and must seek advice from a trained money adviser before setting up a DAS.