When you enter a formal debt solution like a DAS, it’s important to stick to the terms of your arrangement until your final payment has been made.
This includes making payments in full and on time and keeping your money adviser informed of any temporary or permanent changes to your financial circumstances.
Failure to do so can lead to your DAS being revoked and there can be serious consequences for both you and your financial situation when this happens.
What is a DAS?
A Debt Arrangement Scheme (DAS) is a formal debt solution that can allow you to consolidate your unaffordable debt into a series of smaller monthly payments based on what you can comfortably afford.
Under a DAS, you’ll work with an approved money adviser to create a Debt Payment Programme or Debt Payment Plan (DPP), which is essentially a plan of how you intend to pay your creditors.
Because of their legal status, Debt Payment Programmes can only be set up and managed by a DAS-approved money adviser.
Because you’ll be required to repay 100% of your unpaid debt with a DAS, the length of your arrangement depends entirely on how much debt you have.
However, while this means it could potentially last up to 10 years, the average length is around six and a half years.
Once your DAS has been set up and approved, all interest and charges on the debt will be frozen and your creditors (the individuals or businesses you owe money to) will no longer be allowed to contact you, collect payment, or take legal action against you.
Are you considering a DAS?
How does a DAS work?
Before you apply for a DAS, it’s important to know what to expect from the process and what will happen after you’ve made your final payment.
We’ve broken down the steps involved in the Debt Payment Programme application process below:
Contact an approved money adviser
First, you must contact a DAS-approved money adviser. Money advisers are financial experts trained to provide expert debt advice and help people whose debts have become too large or complex to manage.
They will conduct a thorough review of your income and expenditure and calculate your disposable income (the amount of money left over at the end of the month after your essential living costs).
This figure will then be presented to your creditors as your new monthly payment amount.
Review your DPP
Once your DPP has been drafted, you must carefully read and review the proposed terms and inform your money adviser of any problems or suggestions you have.
This will likely be the last chance you have to make any changes to your monthly payments, so it’s important you speak up if you have any doubts about being able to afford them.
The DDP will then be sent to your creditors for approval.
Await creditor approval
Once your creditors have received your DPP, they will have 21 days to vote on whether they accept or reject it.
The Accountant in Bankruptcy (AiB) – the government department responsible for managing personal insolvencies – will write to you to let you know how your creditors voted.
However, it’s important to note that even if your creditors reject your DPP, your money adviser can overrule their decision if they believe it’s ‘fair and reasonable’.
Start making payments
The final step in the application process is making your first payments towards your DAS.
Typically, you’ll be required to make your first payment within 42 days of your DPP being approved.
Remember, your monthly payments are based on your income and expenditure and you’ll never be asked to pay more than you can comfortably afford towards your debt.
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What happens if my DAS is rejected?
Although rare, your creditors may reject your DAS if they believe you’re in a position to pay more than you are proposing in your DPP.
This can be disheartening, but it doesn’t necessarily mean your DAS won’t go ahead.
When your DAS is rejected, you’ll receive confirmation of this in a written letter from the AiB.
From the date your DAS is officially rejected, all interest and charges will be re-added to your debts and your creditors will be free to take further action against you.
However, if you believe the AiB has not followed the law when making a decision, you’ll have 14 days to request a review.
They will then have 28 days to write to you with their response, letting you know whether they’ve changed their mind or still stick by their decision.
Finally, if the alternative Debt Payment Programme (DPP) is also rejected, you can register an appeal with the sheriff court as long as it’s filed within 14 days.
This can be done alone or with the help of your money adviser.
Will a DAS affect my credit rating?
Being in a debt solution will almost always affect your credit rating, and a DAS is no different.
For example, from the date you enter a DAS, it will be added to your credit report for six years.
During this time, you’ll find it extremely difficult to get approved for further credit, such as a mortgage, loan, phone contract, or even a bank account.
This is because, when you apply for credit, lenders will look at the information contained in your credit report to help them decide whether you’re an eligible candidate, and a DAS indicates that you’ve struggled with debt repayment in the past.
Even if a lender is willing to lend to you with a DAS on your credit file, you’ll be subject to higher interest rates and limited products.
However, the good news is that, as long as you make your DAS payments in full and on time, your credit score will gradually improve.
What happens if my DAS is revoked?
Having your DAS revoked can be worrying, but knowing what’s likely to happen can help put your mind at ease.
We’ve outlined the various things that can happen when your DAS is revoked below:
You’ll lose creditor protection
The most important thing to remember about your DAS being revoked is that you’ll no longer be protected from creditor contact or legal action.
This means that your creditors will be able to chase you for the money owed and may even take you to court to force you to pay up.
You’ll need to pay interest and charges
When your DAS is revoked, your creditors will be free to reapply interest, charges, and penalties on the debt.
This means that the amount you owe will increase and continue to do so the longer it remains unpaid.
You may struggle to get another DAS
The fact that your DAS was revoked may make it more difficult to successfully reapply for a DAS in the future.
This is because a revoked DAS indicates that you’ve broken the terms of your arrangement and could be an unreliable borrower.
Can I take a break from my DAS payments?
Because most DAS payment terms last several years, it’s not uncommon for your financial situation to change for the worse during this time.
This might mean you’re no longer in a position to make payments towards your DAS as originally agreed.
When this happens, your money adviser may recommend something called a ‘payment holiday’.
This is when you stop making payments for up to six months and is designed to allow you to seek expert advice without the extra pressure of worrying about when your next DAS payment is due.
Typically, a payment holiday will only be offered if your income has reduced by at least 50% due to a job loss, maternity leave, or another serious life event.
There is no limit to the number of times you can apply for a payment holiday under a DAS, but the AiB will take any former payment holidays into account while they make a decision and your repayment term will be extended to allow you to repay the remainder of the debt owed when your payment holiday ends.
What other debt solutions are available?
A DAS is a common debt solution that can help you deal with your unaffordable debts in a way that’s more manageable and sustainable for you.
However, it’s not the only debt solution available and there may be an alternative option that’s better suited to your financial situation.
Here are some of the most common alternatives to a DAS:
Protected Trust Deed (PTD)
One of the most common alternatives to a DAS is a Protected Trust Deed (PTD). Both are formal debt solutions, which means you’ll be granted protection from your creditors and all interest and charges on the debt will be frozen regardless of which option you choose.
However, one of the biggest differences between a DAS and a PTD is that PTDs have a set length (usually four or five years) while a DAS will last however long it takes for you to repay your debts.
Once you’ve made all the payments towards your PTD, any remaining debt will be written off. Another difference is that PTDs require a minimum debt level of £5,000.
Debt Management Plan (DMP)
Despite being similar in name, there are various differences between a DAS and a Debt Management Plan (DMP).
Firstly, a DMP is an informal debt solution, which means your creditors aren’t legally obliged to stick to the proposed terms or even accept the arrangement.
Because of this, there is no guarantee that interest and charges on your debt will be frozen and this is done at the discretion of your creditors.
Furthermore, while all unsecured debts can be included in a DAS, only non-priority debts, such as personal loans and credit cards, can be included in a DMP.
Conclusion
A DAS is a formal debt solution that can help you repay your unaffordable debt through a series of smaller monthly instalments, making it easier for you to manage your debt and pay back your creditors.
Like most debt solutions, a DAS is only successful if you stick to the terms as outlined in the original agreement.
Failure to make payments as originally agreed or stopping payments without authorisation can result in your DAS being revoked.
Knowing what can happen if your DAS is revoked can help you avoid common pitfalls and complete your arrangement with no major problems.
