What is a debt arrangement scheme (DAS)?
A debt arrangement scheme (DAS) will allow you to pay off debts over an extended amount of time, while protecting you from any further action from companies that are trying to recover the money they’re owed. This is called a debt payment programme (DPP).
A DAS is an alternative to a trust deed or sequestration in Scotland, and IVAs or bankruptcy in England, allowing you to freeze the interest and charges on debt and repay over a period that suits you.
A debt arrangement scheme is managed by a DAS administrator, and its duration depends on factors like how much debt you’re in, as well as how much you can afford to pay towards it.
There is no minimum or maximum level of debt needed to be able to enter into a DAS, and the companies you are in debt to that are included in the scheme will receive regular payments towards the balance owed under legally binding terms.
Am I eligible for a debt arrangement scheme?
You can qualify for a debt arrangement scheme if you:
- Live in Scotland
- Have one or more debts
- Have a reasonable amount of money left after all your outgoings
- Are not bankrupt, subject to a bankruptcy restriction order, undertaking or in a protected trust deed
What debts can be included in a debt arrangement scheme?
Any unsecured debt can be included, including credit card, payday loan and catalogue debts.
Secured debts such as ongoing mortgage or secured loan payments, student loans and legal debts can’t be included, and you must continue to make these beyond your DPP.
How long does a debt arrangement scheme last?
This varies, depending on your circumstances, but on average, according to the Accountant in Bankruptcy, they last six and a half years. It would be unusual for the DPP to take longer than ten years. If this was to be the case, it could be worth investigating a trust deed as an alternative, as you’d be able to write off some of the debt.
How does a debt arrangement scheme work?
By entering a DAS, you commit to making one affordable monthly payment into a DPP, which is based on all the companies you owe money to being paid regularly.
It must be managed by an approved money advisor, who will communicate with the people you owe money to on your behalf.
You can employ a money advisor though free advice companies such as your local Citizens Advice Bureau or your local authority’s money advice team. Alternatively, an insolvency practitioner (or a suitably qualified member of their team) can act as a money adviser for your debt arrangement scheme.
Following the introduction of new legislation in November 2019, it no longer costs anything to set up or manage a debt arrangement scheme in Scotland.
What’s the process of entering a debt arrangement scheme?
There is a simple process that will be followed by your advisor to include each company you’re in debt to in the proposal. Here’s how setting up a DAS works:
- DAS proposals are sent to every company you owe money to. They’re given 21 days to respond if they object.
- If there are no objections, the DPP is automatically approved.
- If one or more companies do object, the DPP can still become approved if it is judged to be “fair and reasonable” by the DAS administrator (accountant in bankruptcy).
- The money advisor will help you produce a substitute debt payment programme based on the current situation and send this for approval.
- As long as the revised proposal is fair, the creditors will not be able to stop the debt payment programme being approved.
- If the DPP is rejected, you have the right to appeal against the decision after the review process has been fully exhausted, but you may need to look at other options, such as a protected trust deed or bankruptcy.
- If your circumstances change while you’re repaying your debts under a DAS, the DPP may be varied to accommodate this change without charge.
What are the advantages of a debt arrangement scheme?
- You will only make a single monthly payment, based on what you can afford, to an approved advisor who will pay this to the companies you are in debt 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 companies included once approved.
- You can apply for a payment holiday of up to six months if you find it difficult to pay.
- A DAS is a flexible arrangement, 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 and reasonable’.
What are the disadvantages of a debt arrangement scheme?
- Your credit rating may be badly affected.
- If you don’t comply with the conditions of the DPP the DAS could be revoked. This means companies are free to pursue legal action and to add back on their interest, fees and charges if they want to.
- There’s no debt written off – you will only get relief from further interest, fees and charges.
- A DAS could take longer to pay off than other debt solutions.
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.