What Debts Can be Included in a Debt Arrangement Scheme (DAS) ?
The Debt Arrangement Scheme (DAS) is a debt solution available in Scotland which allows you to work with a money advisor to lower your monthly payments if they have become unaffordable. Your income and expenditure is calculated and your surplus income is put towards repayment every month until your total debt is repaid. Usually, your interest and fees are frozen, but none of your debt is written off unless it is accepted that your Debt Payment Programme (DPP) would otherwise last an unreasonably long time.
Unsecured debts included in the DAS
The DAS can include a great number of debts, which can set it apart from other debt solutions. Most unsecured debts can be included in your DPP. This means setting up a payment plan for debts which are not tied to an asset, such as:
- Credit cards
- Store cards
- Personal Loans
- Payday Loans
- Council Tax Arrears
- Utility Bill Arrears
- Shopping catalogues
There are some unsecured debs that cannot be included in a DPP, however. Most notably, student loans cannot be included in a DAS, as they are taken directly from your wages. This is true for all debt solutions in the UK.
Similarly, your DPP will not permit child support or maintenance arrears to be included in your arrangement. This is because childhood, the period of time your child will most need this financial support, is a limited period of time. A DAS may last up to approximately 12 years and by that time your child might already be an independent adult themselves.
Secured Debts and a DPP
A lot of debt solutions do not accept secured debts, and the DAS is no exception. Secured debt is created when a loan is tied to an asset. You have an asset if you have property with value, this might be a home, a car, a television, a white good, or any other item you required a loan to buy. Examples of secured debts which you cannot include into your DPP are:
- Re-mortgages to release equity
- Hire Purchase agreements
- Other car finance options
Unlike some other debt solutions, there are some forms of secured debts that you may be able to include in your DPP:
- Mortgage arrears, which are missed mortgage payments
- Rent arrears, which are missed rent payments
- Car finance arrears, which are missed payments on your car, such as with a HP agreement
It must be noted, however, that it is not guaranteed that your arrears will be accepted as part of your DPP, so consult your adviser about this. Having a DPP will not instantly stop your home from being repossessed by your landlord or your mortgage provider if you have rent or mortgage arrears. Hopefully, your landlord or mortgage provider will agree to the repayment plan outlined in the DPP, but if you miss further payments you could still lose your home. Situations can vary, so ensure this important topic is discussed with your adviser.
When considering a DAS, you must understand the concept of ‘priority debts’. This is a term used for debts with serious implications if you do not pay them. They include most secured loans, but also some unsecured loans. Generally, your priority debts are:
- Your mortgage or your rent
- Your utility bills
- Council tax
- Court payments
- TV License Payments
- Student Loan Repayments
- HP agreements, such as for your car
- Child support or maintenance
If you are unsure if something is a priority debt, ask your self who owns the debt. If the answer is the government or someone who provides you with an essential service or asset, such as the roof over your head or the car you take to work, then it is a priority debt.
Understanding priority debts is important to the DAS as it will help you calculate your DPP. If you have a priority debt that cannot be included into your DPP, it becomes an additional monthly expenditure for you to factor into your surplus income. For example, even if your mortgage arrears manage to be included in your DPP, your mortgage will not be. This becomes a crucial part of your expenditure.
Your DPP might not be able to include your mortgage arrears. If this is the case than repayment of these arrears must be coordinated separately and will also constitute part of your expenditure. This is particularly important as your surplus income after all expenditure has been taken into account must be large enough to convince