Who Can Apply for a Debt Arrangement Scheme (DAS)?
If you have problem debt, there are many options that you could consider. The Debt Arrangement Scheme (DAS) is a solution available in Scotland which allows you to apply for a Debt Payment Programme (DPP). A DPP is an arrangement tailored to your income and expenditure. Your surplus income will be proposed to your creditors as a reduced monthly payment to be paid until your debts are satisfied. This is similar to a Debt Management Plan (DMP), although it is a more formal and legally binding solution.
It is important that you review all your options when you are looking for the best debt solution for your circumstance. Some solutions are only available under certain circumstances. For example, the DAS, Trust Deeds and Sequestration are all only available in Scotland. If you are considering the DAS, you must have:
- Residency in Scotland
- The advice of a qualified money adviser
- A surplus monthly income, which is the remainder of your income after essential expenditure
- No other formal debt solution, such as a Trust Deed or Sequestration
You may also want to consider the types of debt that you currently have when deciding if the DAS is suitable for your circumstance. Generally, these forms of debt can be included in your DPP:
- Credit Cards
- Personal Loans
- Pay Day Loans
- Store Cards
- Other Unsecured Debt
Debts that cannot be included in your DPP include:
- Hire Purchase Agreements
- Other Secured Debts
Some debts are more likely to be rejected by your creditors in a DPP, and so may be advisable not to include in your DPP:
- Mortgage or Rent Arrears
- Car Finance Arrears
- Other Priority Debts
It is important to get an experienced adviser so that your DPP has the best chance of being accepted. They can advise you whether your arrears should be included in the DPP. Remember, having rent or mortgage arrears always puts your home at risk from being repossessed by your landlord or mortgage provider. They are a crucial priority debt which can have serious consequences if you do not repay.
There are other options available to residents of Scotland that are worth considering as they may be more suitable for your situation. The two main formal alternatives are Sequestration and Trust Deeds, but you might also want to consider an informal DMP.
This is essentially Scottish bankruptcy. It is often viewed as a last resort as it is very disruptive and you lose control of your finances and assets, which means your Trustee can sell your home. Some essential belongings are protected. A Trustee decides how best to repay your creditors over 12 months, but they can also prescribe further monthly payments. Your remaining debt is then written off. This is most often an option for those who have no surplus income to offer to their creditors.
- A Protected Trust Deed
Similarly to the DAS, it involves calculating your surplus income and distributing it among your creditors. The great advantage of a Trust Deed is that there is a time limit of four years for your repayments, after which some of your debt may be written off. This could allow you to have a fresh start much earlier than you may have had with a DAS. Home owners with a lot of equity in their home, however, may be asked to re-mortgage their home to release the equity to their creditors. You will not be asked to sell any assets.
- Debt Management Plan (DMP)
This debt solution is very similar to the DAS as it involves using your surplus income to offer your creditors a reduced monthly payment which you will pay until your debt is completely repaid. Often, you organise and propose this agreement yourself, although you might seek some advice when preparing the agreement. As the system is an informal solution, it may be possible to avoid its formal entry onto your credit report. Creditors, however, may still mark the debts as unsatisfied or late, which will negatively impact your credit score. Similarly, your creditors are under no obligation to agree to the DMP, nor do they have to freeze their interest and fees. They could also change their mind as the agreement is not legally binding.
Who could benefit from a DAS?
Ultimately, the DAS is a good option for those who want the security of a formal solution and who might be able to completely pay off their debts in less than 4 years using their surplus income, particularly if they are home owners with a lot of equity which they would like to protect.
You must weigh up the pros and cons for yourself as every situation differs, but if lowering your monthly payments means you are going to stay in debt for a much longer period of time, you should consider a Trust Deed as your debts can be written off after four years. Similarly, rebuilding your credit score might be easier with a DMP, which is less likely to appear on your credit report, or a Trust Deed, which leaves your credit report after 6 years.