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17.04.2018

DAS or Trust Deed?

The DAS and Trust Deeds are both formal solutions to unaffordable debt, administered by the Scottish government. There are certain similarities between the plans, but which one is best for you will depend upon your individual circumstances. Below we outline what you need to know about each solution, so you can get a better idea of which one could benefit you more.

Trust Deeds

  • How they work

A Trust Deed is a legally binding solution for people who are struggling with problem debt. Once in a Trust Deed, you will make a single monthly contribution towards your debts, based on what you can afford after essential living costs have been met. At the end of the Trust Deed, any remaining debt will be written off, giving you a fresh financial start.

  • Length

Trust Deeds usually last for five years, but can sometimes last for six.

  • Eligibility

To be eligible for a Trust Deed, you must have £5,000 or more of debt, owed to at least two creditors, be resident in Scotland, and be able to afford a monthly contribution towards your debts.

  • Advantages

Once your application for a Trust Deed has been accepted, your creditors can no longer take legal action against you – this means, provided you stick to the terms of the Trust Deed, you cannot be made bankrupt. Your creditors are also prevented from contacting you, putting a stop to the hassle of persistent letters and phone calls which can make problem debt so stressful. Another advantage of a Trust Deed is that a significant proportion of your debt is written off, allowing you to become debt-free in a relatively short space of time compared to other solutions.

  • Disadvantages

The main disadvantage of a Trust Deed is that it will have a negative impact on your credit score, which can take some time to rebuild. This means accessing further credit once your plan has ended can be challenging. Another disadvantage is that, if you are a home-owner, you may be expected to release equity to put towards the Trust Deed. Although Trust Deeds do allow for some flexibility, if you do not keep up with your payments you run the risk of the plan failing, and could face sequestration (Scottish bankruptcy).

DAS

  • How it works

The DAS is a government scheme designed to help people struggling with unmanageable debt. Under DAS legislation, you will begin a Debt Payment Plan (DPP), tailored to your individual circumstances. In the DPP, you will make a single payment towards your debts each month, based on what you can afford. Any interest, fees, or charges on your debt will be frozen to make clearing your debts easier, and you will be afforded legal protection from creditors.

  • Length

The length of a DPP depends upon how much debt you have, and how much you can afford to pay towards it each month. According to the Accountant in Bankruptcy, Scotland’s insolvency service, the average length of a DPP is six and a half years – one and a half years longer than a typical Trust Deed. DPPs will not usually last longer than 10 years, however.

  • Eligibility

To be eligible for the DAS, you must live in Scotland, have one or more debts, be struggling with your current repayment plan, and have a reasonable amount of disposable income to put towards a DPP. There is no set amount of debt which you need to be eligible for the DAS.

  • Advantages

Like a Trust Deed, the DAS is legally binding, meaning that during your DPP, creditors can no longer contact or take legal action against you. You will also make a smaller monthly contribution to your debts, making it easier to meet essential living costs. Additionally, all of your assets, including any equity you might have in property, is entirely protected. Finally, the main advantage which a DPP has over an informal solution is that all interest, fees, and charges on your debts are frozen.

  • Disadvantages

As with a Trust Deed, and any formal debt solution, entering into a DPP will have a negative impact on your credit rating, making it more difficult to access credit in the future. If you do not keep up with your DPP payments, it could be revoked, leaving your creditors free to take legal action against you, and resume charging interest and fees on your debt. Finally, unlike a Trust Deed, none of your debt is written off in a DPP. This can make repaying your debts a longer, more expensive process.

For more information about DPPs, Trust Deeds, and other debt solutions, call Creditfix on 0808 2085 198. A friendly advisor will be able to give you confidential advice about dealing with problem debt.