Advantages of a Debt Arrangement Scheme - Carrington Dean stars-five-icons

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30.10.2018

Advantages of a Debt Arrangement Scheme

The Debt Arrangement Scheme (DAS) calculates your surplus income and proposes a more manageable monthly payment to be distributed among your creditors. If they approve this new arrangement, known as a Debt Payment Programme (DPP), you continue your payments until the entirety of the debt is paid off.

Making the decision to solve your debt problem is a huge and difficult step. With so many debt solution options available, comparing them all can be daunting so a good place to start could be their advantages. To help you make the decision that is best for you, here are the advantages of the DAS.

  1. Stress Reduction

While this may be true for all debt solutions, it is worth mentioning because of the real benefit that it makes to your daily life. For many people, the worst aspect of debt is the sleepless nights, the anxiety when the phone rings, and all the other ways their mental health is affected by worrying about their finances. Entering into a DPP, or another debt solution, can have a profound impact on your outlook on life and it comes up again and again as the number one benefit of taking control of your debt.

  1. Affordable Monthly Payments

The Debt Arrangement Scheme calculates your real surplus income and proposes this as your new monthly payment to be distributed among your creditors. This is based on your genuine income and expenditure, and includes your home, your bills, your food, and anything else you need to survive.

Reducing your payments in this way makes managing your financial life much easier. You should no longer have the difficult decision of paying off a credit card debt or feeding your family – it is all factored into the calculation. A similar process calculates the payment you make to your Trustee with a Trust Deed, although the payments end after four years, rather than up to 12.

  1. Protection Against Creditors

An integral reason for the reduction in stress with the DAS is that your creditors are no longer legally permitted to take action against you as the DPP is a formal, legal solution. This means they cannot petition the court to make you bankrupt, cannot contact you asking for additional payments outside your DPP, and any arrestment of your wages is stopped in favour of payment through the DPP.

While your creditors can object to your DPP they only have 21 days to do so and, most crucially, their objections can be overruled by DAS Administrator of the Accountant in Bankruptcy (AiB). The DAS Administrator does this when they consider the DPP to be ‘fair and reasonable’ despite any objections.

It is worth noting that Trust Deeds and Sequestration both afford similar protections against your creditors taking action. This is because they are also legally binding solutions. On the other hand, although Debt Management Programmes (DMPs) have many other similarities with the DAS, they offer less protection as they are an informal solution.

  1. Interest and Fees Frozen

Another benefit of the DAS which is shared with Trust Deeds is that your fees and interest are frozen once the DPP is accepted. This is integral to the DPP as your lower payments might not be able to pay off your debt faster than your interest can add to it. Unlike a Trust Deed, however, none of your debt is written off so DPP repayments generally last longer.

A DMP, on the other hand, cannot guarantee that your interest and fees will be frozen because it is not a legally binding solution. It is important to understand, however, that your fees and interest can be reintroduced to your debts with all debt solutions if they fail, so it is important that you successfully make your repayments every month, regardless of the scheme you are on.

  1. Protected Assets and Equity

A particular benefit of the DAS is that your assets and your equity are protected. An asset is property that has notable value, for example your car or your house. While you cannot include your mortgage or any hire purchase agreements in your DPP, you will not be expected to sell anything to repay your debts.

This is also true of a Trust Deed, however, if you own your home and it has significant equity, you may be asked to re-mortgage your home to repay your debts. Equity is the amount of money you would make if you were to sell an asset, factoring in your remaining debt on the asset, fees and tax. Although both a Trust Deed and a DAS could protect your assets, if you have a large amount of equity in your home and you want to avoid using it to repay your debts, then a DAS may be suitable for you.

  1. Flexibility

A final advantage of the DAS is that the scheme has a certain amount of flexibility. If your circumstances change, your money adviser and the DAS Administrator can approve a change in your repayments without the need to involve your creditors as long as it continues to be fair and reasonable. You can also request a payment break or holiday if you find yourself in a difficult situation. Similar protections are available with a Trust Deed, but the informal nature of a DMP gives more power to your creditors to decide.