What is a Debt Arrangement Scheme
The Debt Arrangement Scheme (DAS) is a statutory debt management scheme introduced by the Scottish Government in 2004 to help individuals repay their debt(s).
Under DAS, you can apply for a Debt Payment Programme (DPP) that allows you to pay off your debt(s) free from interest, fees and charges over an extended period of time, ensuring payments are set at a realistic level whilst giving you protection against any legal action from the creditors and safeguarding assets like your home.
Do I Qualify For a Debt Arrangement Scheme?
You may be eligible to participate in DAS if you meet the following criteria:
- You live in Scotland
- You have one or more debts
- You have a reasonable level of surplus income after meeting the normal living costs
- You are not bankrupt, subject to a bankruptcy restrictions order or undertaking, or in a protected trust deed
All debts can be included with the exception of child support payments and court fines. Mortgage/secured loan arrears can be included, however, ongoing mortgage/secured loan payments cannot be included and you must continue to make these out with the DPP.
Debt Arrangement Scheme Process
If you choose DAS, you commit to a debt payment programme (DPP) based on all of the creditors receiving regular payments of their share of whatever you can reasonably afford each month. A DPP can last for any reasonable length of time (normally less than 10 years), depending on the amount of debt and how much you can pay.
A DPP under DAS is proposed to creditors in the following way:
- Proposals are sent to all of the creditors and they have 21 days to respond if they wish to object to them.
- If no creditors object then the DPP is approved automatically.
- If one or more creditors do object then the DPP can still become approved if it is judged to be “fair and reasonable” by the DAS Administrator (Accountant in Bankruptcy).
- It is possible that the circumstances may change whilst you are repaying the debts under DAS, in which case the DPP may be varied to accommodate this change without penalty.
- The continuing money adviser will help you produce an alternative debt payment programme based on the current situation and send this for approval.
- So long as the amended proposal is fair, the creditors will not be able to stop the debt payment programme being approved.
- If the DPP is refused you has the right to appeal against the decision. However, you may need to look at other options, such as a protected trust deed or bankruptcy.
Only qualified money advisers can advise on and manage a DPP under DAS. A money adviser can be employed in the free advice sector, such as with the local Citizens Advice Bureau or local authority money advice team, or an insolvency practitioner (or a suitably qualified member of his/her staff) can act as a money adviser for DAS. The free advice sector advisers will not charge a fee for their services whereas an insolvency practitioner will normally charge a fee.
Once the DPP is approved, you only have one affordable payment to make, therefore, the monthly outgoings should be drastically reduced and the pressure from creditors should stop.
How much does a DAS cost?
If you apply for a DAS DPP with a DAS approved money adviser from the private sector then you is likely to be asked to pay a one-off advice and set-up fee and then an ongoing management fee on a monthly basis by standing order to cover the work required for the duration of the DPP.
It is also possible to apply for DAS for free through a free money advice agency such as the local CAB or local authority money advice centre.
What happens to my home and car in DAS?
As long as you continue to pay the mortgage payments and any secured loan payments as they fall due then the home is entirely unaffected by entering into the Debt Arrangement Scheme, regardless of whether you have significant equity in the property or not.
Unlike an insolvency procedure such as a Trust Deed or sequestration, under DAS you are repaying the debts in full so there is no requirement to realise any equity you may have in the home to pay towards the debts.
If you have arrears on a mortgage or secured loan it may be possible to include these arrears in the DAS DPP and repay them along with the unsecured debts.
The car would be totally unaffected by entering into DAS. The car would be kept and if it is on a HP or other type of finance agreement then the monthly repayment would be allowable as an expense when calculating the payment to the DPP.
Debt Arrangement Scheme Advantages
- It is legally binding on the creditors and is supervised by the Scottish Government (unlike an informal Debt Management Plan which creditors can choose to end at any time)
- The creditors are forbidden from taking any further action against you to recover the debts owed to them
- Any arrestment on the wages that is already in place is stopped
- You make one affordable regular payment which is distributed between all of the creditors for you on a monthly basis.
- DAS freezes all interest, fees and charges on the debt from the date the DPP application is made and these are written off when the DPP is completed
- Any assets you own are unaffected, including the home, even if there is significant equity in it
- Creditors that do not accept the proposals can be forced to comply with the arrangement if it is judged to be “fair and reasonable”
- It is possible to set up a joint DPP, the joint applicants do not need to be jointly and severally liable for any debts
- It is possible to set up a single debt DPP
Debt Arrangement Scheme Disadvantages
- If you do not comply with the conditions of the DPP then it may be revoked. Creditors are then free to pursue legal action and to add back on their interest, fees and charges if they wish.
- Your credit rating may be adversely affected
- There is no debt being written off, only relief from further interest, fees and charges, therefore a DAS may take considerably longer to complete than an insolvency option such as a Protected Trust Deed or Sequestration.