The main aim of a DAS is to help you repay your unaffordable debt over a reasonable period without the added stress of being contacted by your creditors (the people you owe money to).
The average DAS lasts around six and a half years, but you may be able to pay yours off early under certain circumstances.
Debt Arrangement Scheme: Explained
A Debt Arrangement Scheme (DAS) is a legal debt management scheme that can help you deal with your problem debt by consolidating it into one affordable monthly payment.
When you enter a DAS, you’ll work with an approved money adviser to calculate your disposable income (money left over after essential living costs). This figure will be proposed to your creditors as the amount you can afford to pay towards your DAS every month.
They will then help you create a Debt Payment Plan or Debt Payment Programme (DPP), which is a payment schedule that helps your creditors see how you plan to repay your debt over the course of your DAS.
Debt Payment Programmes (DPPs) can only be administered by DAS-approved money advisers. Their main duties are to provide expert advice and guidance and communicate with your creditors on your behalf to ensure your monthly payments are evenly distributed.
Once you’ve made your final monthly payment, your debt will be completely repaid and you’ll be free to move on with your life – as long as you have no other debts outside of your DAS.
Are you considering a DAS?
How long does a DAS last?
Most debt solutions have set lengths – like a Protected Trust Deed (PTD) which typically lasts four years – but a DAS is a little different.
The length of a DAS differs from person to person and depends on how much debt you have and how much you can afford to pay towards it each month.
For example, if you have £15,000 of debt and are left with £200 a month after your essential living costs, you’ll need to make monthly payments of £200 for 75 months (six years and three months) to fully repay your debt.
The average DAS lasts six and a half years, but you could be making payments for up to 12 years if you have substantial debt and little disposable income.
However, if your money adviser works out that it would take you more than 12 years to repay your debt in full, they’ll likely suggest an alternative debt solution.
How will a Debt Arrangement Scheme affect my credit rating?
Like most debt solutions, a DAS will have a negative effect on your credit rating and make it difficult to access further credit for several years.
From the date your DAS is approved, it will be added to your credit file from all of the main credit reference agencies for six years. During this time, lenders will be able to see you have a DAS and will be cautious about entering into a credit agreement with you.
Even if your application is accepted, you’ll typically face higher interest rates and stricter terms compared to someone without a DAS. This is to protect your lender in the event that you default on your payments.
Furthermore, your details will be added to the ‘DAS Register’, which is an online database of everyone in a DAS and is commonly used by lenders, employers, and landlords to check a candidate’s credit history.
However, it’s worth noting that almost every debt solution, including a Protected Trust Deed (PTD) and a Debt Management Plan (DMP), will negatively affect your credit score and make borrowing a challenge. Additionally, the missed payments that led to you applying for a DAS will have already harmed your credit score.
How much does a Debt Arrangement Scheme cost?
Due to recent legislative changes, money advisers are no longer allowed to charge you to enter a DAS. This doesn’t, however, mean that they won’t be paid for the service they provide.
For example, your money adviser will be paid an application fee of 2% of your total debt and a distribution fee which is capped at 8% of your total debt. This means that they will receive 10% of your total debt throughout your DAS – all of which comes from your usual monthly payments.
Put simply, you’ll never be asked to make extra payments outside of your usual payment schedule and your creditors will cover the cost of your DAS by accepting 10% less than what they’re owed.
Can you pay a DAS off early?
Because a DAS lasts several years, you may be wondering if there’s anything you can do to exit your arrangement early.
We’ve outlined the situations in which you may be able to leave a Debt Arrangement Scheme early below:
You receive a lump sum payment
Receiving a lump sum payment (e.g. inheritance, bonus, or lottery win) may allow you to pay off your DAS and leave your arrangement early, but the cash injection must be equal to or more than your remaining balance.
For example, if you have £5,000 of debt left to pay and receive a lump sum payment of £8,000, you should be able to contribute £5,000 of the money towards your DAS and split it among your creditors to settle your remaining balance.
You make an offer of composition
Sometimes, your creditors will be willing to accept less than what they’re owed in exchange for receiving a certain percentage of your debt over a set period. This is known as making an offer of composition.
However, this is usually only possible if you’ve repaid a minimum of 70% of your debt and have been making payments for at least 12 years (excluding payment holidays).
Your DAS is revoked
Finally, your DAS will be revoked (cancelled) if you break the terms of your DPP. This can happen if you miss more than three payments without a payment break or purposely give false information to your money adviser.
Once a DAS has been revoked, creditor protection will be lifted, interest and charges will resume, and you’ll become liable for the debt again.
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Is there a fee to leave a DAS early?
Some debt solutions charge an early repayment fee for completing an arrangement earlier than planned. Thankfully, this isn’t the case for a DAS.
When you leave a DAS early – whether it’s through a lump sum payment or an offer of composition – you won’t be charged for doing so.
This can give you peace of mind knowing that once you’ve made your final payment and settled your debt, you’ve only repaid what you owe and are free to move on with your life.
What happens when a DAS ends?
There are several things that can happen when a DAS ends, including:
Your total debt will be repaid
One of the main things that happens when a DAS ends is your total debt will be repaid.
This means your debt is officially settled and your creditors can no longer chase you for any of the money owed.
Interest and charges will be waived
During a DAS, all interest and charges on the debt will be frozen to allow you to focus on repaying your outstanding balance.
When a DAS ends, the frozen interest and charges will be waived, meaning you don’t have to pay it.
Your credit score will improve
Once you’ve made your final DAS payment, your credit file will be updated and your credit score will improve accordingly.
Additionally, the AiB will remove your details from the DAS Register and your creditors will be informed that the debt has been fully repaid.
Conclusion
When you enter into a formal debt solution like a DAS, you’re committing to being locked into a legally binding debt repayment plan for a set period.
However, you may be able to leave your DAS early under certain circumstances, such as if you come into a large sum of money or have been making payments for some time.
Unlike some other debt solutions, there is no early repayment fee for leaving a DAS and you should be able to exit your arrangement with no problems as long as you meet certain criteria.
Whether you’re already in a DAS or just considering one, don’t hesitate to reach out for expert debt advice if you feel like you need it and inform your money adviser as soon as possible if your financial circumstances change.
