There is no fixed length for a Debt Arrangement Scheme, however they can last up to 12 years.
Seeking debt relief is not a decision that should be made lightly. Though timeframes can vary, getting out of debt isn’t an overnight journey and most debt solutions require several years of financial responsibility and commitment.
However, while it can be tempting to choose the debt solution that gets you out of debt the quickest, it’s important to consider other key factors, such as the impact on your credit rating and whether it’s the best option for your financial circumstances.
What is a Debt Arrangement Scheme?
A Debt Arrangement Scheme (DAS) is a formal debt solution from the Scottish Government designed to help eligible individuals repay their unaffordable debt through a series of smaller monthly instalments.
Because a DAS is legally binding, it can only be set up and managed by a DAS-approved money adviser who will calculate your monthly payments and distribute them among your creditors (the people you owe money to).
Under a DAS, your money adviser will work with you to create a Debt Payment Programme or Debt Payment Plan (DPP), which is essentially a payment schedule outlining how much your monthly repayments are going to be based on your income and expenditure. Debt Payment Programmes (DPPs) can only be set up by approved money advisers.
Even if one or more of your creditors have started the process of taking you to court, a DAS will typically put a stop to this and you’ll be protected from further legal action going forward.
Are you considering a DAS?
How does a Debt Arrangement Scheme work?
Knowing how a DAS works can help you decide whether it’s the right debt solution for you.
The average DAS application takes between six and eight weeks from start to finish.
Here is a quick guide to how a DAS works:
Reach out to a money adviser
The first thing you must do before you can apply for a DAS is reach out to a DAS-approved money adviser.
There is no set process for finding a money adviser and it’s up to you to ensure they match your specifications and, more importantly, are DAS-approved.
There is also no fee required for working with a money adviser and your creditors will cover the cost of setting up your DPP at a later stage.
Review your financial circumstances
One of the first things your money adviser will do is calculate your disposable income (the amount of money left over after your essential living costs have been paid).
This figure will then be presented to your creditors as the amount you can reasonably afford to pay towards your DAS each month.
Because your monthly payments are worked out based on an up-to-date review of your finances, you should never be in a position where you’re unable to afford your DAS or your essential living costs.
Draft a DPP
The next stage of the DAS process is drafting a DPP to present to your creditors.
This is essentially a document outlining details of your income and expenditure and how much you can afford to pay towards your DAS each month.
Before your DPP is sent to your creditors, you must ensure you have read and reviewed it as this will likely be your last chance to make any changes to your payment schedule before it’s approved.
Obtain creditor approval
Once you are happy with your DPP, it will be sent to all of your creditors who will have 21 days to approve or reject the terms outlined within it.
This is usually just a formality but some creditors may reject your DPP if they have reason to believe that you’re in a position to pay more than what you’re proposing.
However, even if your creditors reject your DPP, your money adviser can overrule their decision and submit an alternative Debt Payment Programme (DPP) if they believe it would be ‘fair and reasonable’ to do so.
Start your DAS
Once your DAS has been approved, it will be added to your credit file, all interest and charges on the debt will be frozen, and your creditors will be instructed to stop contacting you or asking you for payment. This is also when you’ll be informed of your first payment date, which is usually within 42 days.
From this date, it’s important to stick to the terms of your DAS as per your DPP and inform your money adviser of any changes to your financial situation, such as a job loss or a decrease in earnings.
The key to a successful DAS is making payments in full and on time and maintaining open and honest communication with your money adviser.
How long does a Debt Arrangement Scheme last?
With a DAS, you’ll be expected to make payments until your total debt has been repaid. This means that the length of a DAS differs from person to person and ultimately depends on how much debt you have and how much of it you can afford to repay each month.
For example, if you have a total debt level of £15,000, earn £1,000 a month, and have £150 of disposable income after your essential living costs each month, you’ll have to make monthly payments of £150 for a total of eight years and four months to clear your debt.
The average DAS lasts six and a half years, but it’s not uncommon for a DAS to last up to 12 years if you have substantial debt and can only afford to pay a small amount towards it each month.
However, if an initial review of your income and expenditure predicts that it will take up to 20 years for you to repay your debt, your money adviser will usually recommend an alternative debt solution.
Once you’ve made your final payment, you can rest easy knowing that 100% of your debt has been repaid and you don’t owe your creditors a penny more.
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Can I leave a DAS early?
The main aim of a DAS is to allow you to repay your debt over a reasonable period. However, there are certain situations in which you may be able to exit your arrangement early. We’ve outlined them in more detail below:
You receive a lump sum payment
Like most debt solutions, you may be able to leave your DAS early if you receive a lump sum payment (e.g. inheritance, lottery win, or bonus) at any point during your arrangement.
However, your money adviser must agree to you leaving your DAS early and the cash injection must be equal to or more than your remaining balance.
You make an offer of composition
Under certain circumstances, your creditors may be willing to accept less than they are owed and let you leave your DAS early.
This is known as making an offer of composition and can be a way for you to end your payment plan earlier than scheduled.
However, an offer of composition can only take place if you’ve repaid at least 70% of your total debt and have been making payments for over 12 years (excluding payment holidays).
Your DAS is revoked
Failure to stick to the terms of your DPP will result in your DAS being revoked. When this happens, all protections placed on you will be lifted and your creditors will be free to chase you for the money owed again.
This also means that interest and charges will resume and your balance will continue to increase the longer your debt remains unpaid.
What debts can be included in a Debt Arrangement Scheme?
Before you apply for a DAS, it’s important you know which debts can and can’t be included.
Generally, most unsecured debts are covered by a DAS, including:
- Personal loans
- Credit cards
- Payday loans
- Overdrafts
- Store cards
- Catalogues
- Utility bills
- Council tax arrears
Mortgage arrears can sometimes be included in a DAS but this is at the discretion of your money adviser. Secured debts, however, typically can’t be included in a DAS.
What happens if I can no longer afford my monthly payments?
The average DAS lasts six and a half years so it’s not uncommon for your financial circumstances to change at some point during this time.
When this happens, you must inform your money adviser as soon as possible (ideally within a week) who will likely suggest a payment holiday or a variation.
Failure to inform your money adviser or simply missing payments without approval will result in your DAS being revoked by the AiB.
Payment holiday
When your income falls below 50% or more due to a financial emergency or unexpected cost, you may be able to apply for a payment holiday of up to six months.
This can give you the time you need to get back on your feet without worrying about where your next DAS payment is coming from.
Once your payment holiday ends, you’ll be expected to make up for the missed payments and your DAS will be extended to allow for this.
Variation
When your finances undergo a more permanent change, your money adviser may recommend varying your payments to an amount you can comfortably afford.
This can be done by writing to the AiB with a copy of your budget enclosed, explaining how your situation has changed.
Typically, a variation is only approved when all parties agree it’s the best solution.
Conclusion
Knowing how long a DAS lasts can help you determine whether it’s the right option for you or if another debt solution, such as a Protected Trust Deed (PTD), would be better suited to your financial circumstances.
The average DAS lasts six and a half years, but your total repayment term will depend on how much debt you have and how much you can afford to pay towards it each month.
Remember, a DAS is just one of the many solutions that can help you manage your unaffordable debt and there are other options available.
