Debt Arrangement Scheme
What is a Debt Arrangement Scheme?
The Debt Arrangement Scheme (DAS) is a legal scheme run by the Scottish Government. It will give you time to pay off your debts over a reasonable length of time through a debt payment programme.
Whilst a debt payment programme is in place through a Debt Arrangement Scheme , all interest, fees and charges on your debt will be frozen from the date that you apply and creditors should not contact you.
As long as you fully complete the debt payment programme and pay off your debts, the frozen interest, fees and charges will be written off.
The Debt Arrangement Scheme can also protect you from creditors making you bankrupt, or using court action against you to enforce your debts. Enforcing a debt through the courts is often known as ‘diligence’.
Even if some of your creditors have started to use court action against you, in most cases joining DAS will stop this action from going any further.
- You will get time to repay your debts over a reasonable period.
- You will only have to make a single regular monthly payment. This is paid to an approved payment distributor who will send the money to your creditors for you.
- The debt payment programme is normally free. See the later section Will I be charged a fee to join DAS? for more information.
- Joining DAS will protect you from most creditors using court action to recover their debt.
- DAS is flexible and, if your circumstances change, you may be able to vary your debt payment programme to make it more affordable, or even pay it off more quickly if your situation has improved.
- If you have a sudden and short-term drop in your income of 50% or more, you may be able to arrange a payment holiday of up to six months, until your circumstances improve.
- Interest, fees and charges are frozen from the date you apply for a debt payment programme and are written off completely when it is completed.
- If you have made payments for 12 years and have paid 70% of your debts, you may be able to end the debt payment programme early. This is called a composition.
- One key disadvantage or downside of entering a DAS is that doing so will negatively impact your personal credit score. The reason for this is that, although you are not avoiding any debts you’ve accumulated, you are arranging to pay them back at a later date than you initially agreed.
- Another point about a DAS which some people may find difficult is that a debtor cannot take on any more unsecured debts of any kind while their repayment plan is in place, unless it is allowed by the Debt Arrangement Scheme’s scheme’s administrator.
- Debt Arrangement Schemes help people from across Scotland pay back millions of pounds in unsecured debts every year but the repayment process can take a long time. For most people this is taken as a positive but if you are keen to become debt free in a short period of time then a DAS is not for you.
Debt Arrangement Scheme help and Advice
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Debt Arrangement Scheme Frequently Asked Questions
You can apply to join DAS either as an individual or as a couple, as long as:
• you have one or more debts;
• you live in Scotland;
• you have a reasonable amount of money left over after you have taken account of your essential expenditure; and
• you have had advice and assistance from an approved money adviser.
If you want to apply as a couple for a joint debt payment plan, you must both agree to the debt payment programme proposal.
If you have mortgage or rent arrears, you can still apply for a debt payment programme, but you must include your arrears in the debt payment programme. This will not always stop your mortgage lender or landlord from taking repossession action if you are behind with your payments.
If you think that a debt payment programme through DAS might be the best option to help you with your debts, you need to get help from an approved money adviser. Approved money advisers have been authorised by the Accountant in Bankruptcy (AiB) to apply for debt payment programmes through DAS.
The first thing that an approved money adviser will do is to look at all your circumstances and help you to decide on the best debt option for you.
There is a directory of approved money advisers on the DAS website www.dasscotland.gov.uk. You can also find a directory on the Scotland's Financial Health Service's website www.scotlandsfinancialhealthservice.gov.uk.
Once you have found an approved money adviser and decided that a DAS debt payment programme is your best option, your approved money adviser will take you through a series of steps.
These involve checking:
• your income, to make sure you are claiming all the benefits and tax credits that you can;
• your essential outgoings;
• your surplus income (what is left to pay your creditors after your essential outgoings);
• your priority debts;
• how much you have left after paying your priority debts; and
• how much your credit debts are.
In order to do this, your approved money adviser will:
• list all of your debts;
• check the amounts you owe to all your creditors; and
• use a calculation based on the Common Financial Tool.
Your approved money adviser will also contact your creditors, if necessary, and prepare and submit your application for a debt payment programme.
It can take a little bit of time for your approved money adviser to get all the information that they need to be ready to apply for your debt payment programme.
In the meantime, your adviser can contact the AiB and confirm that you are intending to apply for a debt payment programme. This is called an ‘intimation’. Your intimation will then be placed on the DAS Register.
Once on the DAS Register, you will be protected against any creditor action for six weeks and this will give your adviser time to submit your proposal.
Once the DAS Administrator receives your application for a debt payment programme, your details are entered on the DAS Register, if they are not entered already because of an intimation. Once your details are entered you are protected against any creditor action to enforce their debt for six weeks. This protection will only stop if you withdraw your application, or if it is rejected by the DAS Administrator. Once a debt payment programme proposal has been approved, any earnings arrestment in place must also stop.
All creditors who are named on your debt-payment programme proposal will be sent a copy. They will be asked if they agree to your proposal and, if they do not, they are asked to give reasons why not. If a creditor does not respond to this request within 21 days, the DAS Administrator will treat them as if they have agreed to your payment proposal and they will be bound by it.
If you want to withdraw your application for a DAS debt payment programme, you must tell the DAS Administrator in writing before they have either rejected or approved your application. You can do this yourself or you can ask your approved money adviser to do it for you.
What if a creditor objects?
If one or more of your creditors do not agree with the debt payment programme, they will tell the DAS Administrator.
Even if a creditor has objected, the DAS Administrator can still approve your debt payment programme by using the ‘Fair and Reasonable’ test. The DAS Administrator will decide whether to approve or to reject your application by taking into account a range of information for this test, including:
• the total amount of your debt;
• how long your proposed debt payment programme will take;
• how you are proposing to pay and how often you are proposing to make payments;
• how many other creditors have objected;
• any comments that either you or your approved money adviser have made;
• any previous debt payment proposals that you may have made; and
• anything else that they think they should take into account.
If your debt payment programme is approved, it is effective from midnight on the day before the date that the DAS Administrator confirms this on the DAS Register. For example, a debt payment programme approved on 1 February will be effective on midnight of 31 January. The DAS Administrator will inform both you and your approved money adviser. Once your proposal has been approved, you will be able to pay your debts through a single, regular payment as set out in your debt payment programme.
You will also have a ‘payments distributor’ allocated to you by the DAS Administrator. You will make your regular payment to this independent company. Your payments distributor will contact your creditors and arrange to pay regular amounts to them for the period of time agreed in the debt payment programme.
Either your approved money adviser or the DAS Administrator will let your payments distributor know about your debt payment programme so that they can arrange the start of your payments. Your first payment must be made within 42 days of the date of approval by the DAS Administrator.
Some approved money advisers will charge you a fee for providing advice and services. These fee-charging approved money advisers are sometimes called ‘continuing money advisers’.
If you have agreed in writing to pay a fee to a continuing money adviser, the way that they manage your debt payment programme is different to the way that approved advisers who offer free advice will operate.
Both types of money adviser will complete the application form and send it to the DAS Administrator for approval in the same way. However, once your proposal has been approved, the administration of the debt payment programme is different.
If you are using an approved money adviser from a free advice agency, the DAS Administrator becomes responsible for the administration of your debt payment programme. If you are using a fee-charging approved adviser, the administration of your debt payment programme will stay with the fee-charging money adviser.
Approved money advisers working for citizens advice bureaux, independent advice centres and local councils will not charge you for their advice, or for preparing your debt payment programme application.
Some companies in the private sector have also been authorised as approved money advisers and may charge you. You can check if there is a fee on the approved money adviser register. See the earlier section How do I apply to join DAS? for information about how to do this. You would have to pay this fee because it cannot be included in the debt payment programme. Also, before you enter into any agreement with a fee-charging money adviser, the company must follow detailed rules to ensure that they have told you that free money advice is available and from where you can get it.
Your payments distributor cannot charge you a fee for distributing your repayments amongst your creditors. However, the DAS regulations allow them to charge a small fee to your creditors for the service they are providing. This does not affect the payments that you are making.
If you cannot keep to the payments on your debt payment programme because your circumstances change, you should apply to vary it before it is cancelled.
Credit reference agencies check the DAS register regularly and may update your credit file to reflect that information. This is likely to affect your ability to take out further credit.