One of the hardest decisions when you’re in debt is deciding the best way to get out of it. It isn’t always a simple case of saying “well I’ll just pay it back.” Sometimes circumstances conspire to stop you or slow you down past the point where your creditors are happy to wait any longer and want to take you to court or push for your sequestration.
If you think you can pay back what you owe in full if only you had a little more time, the Debt Arrangement Scheme (DAS) is the option that will let you do that.
What is a Debt Arrangement Scheme (DAS)?
A Debt Arrangement Scheme is a debt management tool for you if you have two or more debts and know you could pay them back in full. Perhaps you’ve been in ill-health for a while or have been made redundant from a well-paid job, but you are confident that you can turn things around.
With the help of a trained money advisor, you set up a debt arrangement scheme based on your current financial circumstances which they approach your creditors to gain approval for. The difference between this debt repayment option and others is that the total amount of money you have available for creditors is split fairly between them.
No-one gets more than anyone else, but usually the offer made to your creditor is less than what you are contracted to pay them.
Your creditors then have just 21 days to respond to your offer. If you hear nothing from them, it is assumed they are happy to go ahead with your new payment option. If some of your creditors disagree, it doesn’t necessarily mean your DAS won’t be approved.
If the payment plan is fair and reasonable then your money advisor will go ahead and apply to the Debt Arrangement Scheme administrator for approval. Once approved, every month you make one single payment to a payment distributor, who takes over and ensures that each payment is made on time to each creditor.
Your creditors cannot arrest your earnings and cannot make you bankrupt.
The only time that a creditor’s objection will be upheld is if you simply cannot pay and really should be sequestered or if you have a lot of land or property assets that should be liquidated to pay creditors.
What Happens If Your Circumstances Change?
A Debt Arrangement Scheme has been set up to be a very flexible tool. Should your circumstances change for the worse or the better, your money advisor can make the necessary arrangements to decrease or increase your payments.
What Happens If You Have Mortgage Arrears?
Mortgage arrears are covered by the Debt Arrangement Scheme, but you must still be able to meet your regular mortgage payments. You cannot include your normal monthly mortgage payment in your DAS.
It is still possible for your creditor to take you to court and try to force a repossession however, if you apply for a section 2 order you can delay the process. This will give you more time to pay off the arrears and the courts will take into accounts your efforts to pay them back through your DAS.
The court is not allowed to grant a payment order on the arrears as they are already being paying through the Debt Arrangement Scheme.
Can Family And Friends Find Out About You Being On The Debt Arrangement Scheme?
Even if you don’t tell them, it is theoretically possible for people you know to find out that you have a DAS. Each DAS is entered into a publicly available Debt Arrangement Scheme register, however it isn’t the sort of database you just stumble across – your friends or family would have to know to go there and specifically look for your name.
If you haven’t told them anything about the Debt Arrangement Scheme, it is very remote they would take it upon themselves to find the database and look through for your name.
Lenders also have access to the register, so in the future if you apply for loans or credit cards you may find your DAS affects your credit rating.
The Debt Arrangement Scheme is one of the most flexible debt-repayment tools available, but like all debt solutions you need to take unbiased and professional advice before embarking on it as it.
Give the advisors at Scottish Trust Deed a call on 0800 193 1024 and they will talk you through your options and whether Debt Arrangement Scheme is suitable for your individual circumstances.
How Does The Debt Arrangement Scheme Work?
The beauty of Debt Arrangement Scheme over a Trust Deed is that it is a very simple, flexible debt payment scheme that can help you make real inroads into paying off your debt. Even setting up the DAS is very simple.
Step 1 – Find A Money Adviser
Because Debt Arrangement Scheme is a financial product that needs to be understood by those who undertake it, Debt Arrangement Scheme applications can only be made by specially-trained money advisers.
They have the in-depth financial knowledge to evaluate your financial circumstances and ensure your application is set up correctly. You can find a list of approved money advisers to choose from at www.moneyscotland.gov.uk.
Step 2 – Do A Budget
The most important part of the Debt Arrangement Scheme set up is a budget, which your money adviser can help you do if you have never compiled one before. Your budget has to show income vs expenses so the adviser can see how much surplus you have at the end of every month.
At the moment that might sound impossible if you have nothing left at the end of every month, but you should not include debt repayments at this stage. This should leave you with a surplus of money, which will be earmarked for creditors.
If you do not, then it is unlikely your application will go any further and your money adviser may have to give you advice on other debt solutions that are right for your circumstances.
Step 3 – Creating a Debt Arrangement Scheme (DAS)
Your money adviser will use your budget to design a DAS that distributes your surplus income equally among your creditors. They will also set up an emergency fund with some of the surplus if possible to help you avoid having to take out credit if you have an emergency.
Once the DAS is ready, they will then contact them to get their agreement and your creditors have 21 days to respond. If there is no response, it is assumed they agree with the DAS, but even if they don’t there is no basis for an objection if the DAS is fair and reasonable.
Step 4 – The DAS Is Approved
If no objection is lodged within 21 days that would question the fairness of your DAS it will be sent to the Debt Arrangement Scheme administrator for approval. Once approved, all interest fees and charges on your debt will be frozen.
Step 5 – Begin Your Payment Plan
Once approved by the Debt Arrangement Scheme administrator your DAS will be entered onto the DAS register. A regular monthly payment arrangement is then set up to send your creditors an equal share of your surplus income, however an approved payments distributor handles this so you need never have contact with your creditors.
And if they try and contact you, you simply ask your money adviser to deal with them.
Step 6 – The Final And Best Step
Your DAS comes to an end. Your last payment is made to the last creditor, your payment distributor and money adviser give you the official sign off and suddenly all of your income is yours. You may have been paying your DAS for many years and have owed tens of thousands of pounds.
Now you are free from the pressures of debt and for the first time in recent memory your future is looking happier and brighter.
The Pros And Cons Of A Debt Arrangement Scheme
The Debt Arrangement Scheme has been referred to as the simplest and most flexible debt solution available, all debt management tools have their pros and cons, despite how great some of them may appear to be. What’s right for someone else may not be right for you, so its important you consider the pros and cons in context with your own personal and financial circumstances.
You Gain Time To Pay
Debt Arrangement Scheme gives you as long as you reasonably need to pay off all of your debts. A DAS will run as long as its needed until the debt is cleared.
You Pay Only What You Can Afford
Any surplus money left over once you have created a workable budget is split between your creditors. Each will receive less than you were originally contracted to pay, but many creditors are receptive to this – a DAS means you have committed to paying them back all of what you have borrowed.
The Debt Arrangement Scheme Protects You From Enforcement Action
Once a DAS is approved by a Debt Arrangement Scheme administrator, your creditors cannot take action to sequester you or obtain earnings arrestment or property attachment. Any action that is going through the courts will stop, unless you are already subject to a bankruptcy restrictions order (including an interim order) or bound by a bankruptcy restrictions undertaking. In these cases, you will not be approved by the Debt Arrangement Scheme administrator and the action will go ahead.
Your Debts Will Not Increase
Generally speaking, as long as you stick to the repayment arrangements your interest and penalties shouldn’t increase on your plan until you complete it and at the end of the DPP they are waived. No matter what creditors say, as long as you keep up with your payments they will not be able to increase your debt.
You Do Not Deal With Your Creditors
Your money adviser handles all of the negotiations of your DAS, dealing with the stress and hassle of unpleasant creditors so you don’t have to. Once approved, a payments distributor arranges the payments, so at no time during the course of your DAS should you come into contact with a creditor.
You Do Not Declare Yourself Insolvent
Some debt management solutions are a risky proposition if you are worried about sequestration. If a debt management solution – like a Trust Deed – fails for whatever reason, your creditors could move straight away to have you sequestered because a Trust Deed is an admission of insolvency. With Debt Arrangement Scheme, you are simply setting up a payment plan and that is all. There is no admission of insolvency at all.
Your Assets Are Generally Not Included
Most of the time you do not have to hand over your assets to be sold to release money to creditors. There are some exceptions to this. Assets are regarded by Debt Arrangement Scheme administrators as either essential or non-essential. Having a car is essential for you to get to work, but it doesn’t have to be a very expensive car. If you own a valuable car outright, they may require you to buy a less expensive model to release some money to creditors. However, that is a decision that the Debt Arrangement Scheme administrator may or may not make.
You learn financial management skills
Sticking to a budget and living within your means, living without depending on credit all the time, is a skill that many people have not mastered, but it is something you will be able to do with the help of a money adviser. Once you are debt-free, the skills you have learnt will help you build a much brighter future for yourself and your family.
You Must Go Through A Money Adviser
Individuals cannot make an application for a DAS because it is important to have unbiased financial advice before going ahead with any financial product. The Scottish Government has set up the Debt Arrangement Scheme this way to ensure you understand the commitment you are taking on and receive debt counseling tailored to your circumstances.
There are fees involved
There are fees involved with the administration of your DAS. Your money adviser may or may not charge for their services, but a payment distributor will always charge. As they shield you from creditors and take away all the hassle of dealing with them, it is only to be expected they will make a charge.
You Must Have More Than One Debt
Only multiple debts are eligible for inclusion in Debt Arrangement Scheme so unfortunately, even if you have a very large single debt, you will not be eligible to apply. However, having more than one debt with the same creditor would be classed as having multiple debts.
You Must Be A Permanent Resident In Scotland
Only Scottish residents can register on Debt Arrangement Scheme. Your money adviser would probably consider you a resident if you live full time in Scotland and have a permanent job, as the Debt Arrangement Scheme rules do not specify how long you must have lived in Scotland to be classed as a permanent resident. If you moved permanently to Scotland a few weeks before or are working on a temporary contract, you may find the Debt Arrangement Scheme administrator would not consider you eligible to apply.
You Can Only Make One Application A Year
Unfortunately, you can only apply for Debt Arrangement Scheme once every 12 months, so if your application is rejected you will have to wait. This is to stop people abusing Debt Arrangement Scheme to simply delay court proceedings, rather than being serious about getting out of debt.
You Will Be On The Scheme Until Your Debts Are Paid Off
In contrast to some debt management solutions where you could take a payment holiday, payments cannot be stopped without the express permission of the Debt Arrangement Scheme administrator. If you miss payments, your DAS may be revoked.
Your Credit Rating Will Be Affected
Because you will be paying your creditors less than you were originally contracted to do, you will have broken the terms of your original agreement with your creditors and be in default. This will show up on your credit record for a few years. You can start to rebuild your credit file once you have completed the plan. However, unlike those debt management solutions associated with insolvency, the Debt Arrangement Scheme scheme is not regarded in such a serious way and your credit is likely to recover quickly once your debts are paid off.
Debt Arrangement Scheme FAQ’s
What is the Debt Arrangement Scheme register?
Anyone on Debt Arrangement Scheme is entered into a permanent register kept by the Debt Arrangement Scheme administrator, and you DAS will be entered once approved. Only creditors and your money adviser have access to the register in return for a fee; the general public has no right to see any of the information the register contains.
What happens at the end of the DAS?
There are two ways for your DAS to end. Your final payment at the end of the term will make your obligation to your creditors complete or your debt payment plan could end early if your creditors agree to take a lump sum part payment to settle the debt. In both cases any fees or charges that were suspended will be cancelled.
Can I appeal if my Debt Arrangement Scheme application is refused?
With the Debt Arrangement Scheme, appeals can be made to the sheriff court for your case to be heard. Your appeal will also be heard if you do not agree with any conditions the Debt Arrangement Scheme administrator has added to your DAS or has refused a change to the plan you requested.
What if I have an arrestment order already?
If you have an attachment or arrestment of your income, funds or property, it ceases under Debt Arrangement Scheme on approval of your DAS. The only exception is where your benefits are being deducted directly.
Can I still apply for loans and credit cards while paying off my debts?
You will still have some access to credit, but far less than usual and it will be capped at a certain level. However, as a DAS negatively affects your credit record it is likely you will find it hard to find a lender willing to offer you credit.
Do I have to hand over my assets to the money adviser?
Your money adviser will look at the assets you when they examine your finances, and it may be that if you have an unusually valuable item they may request you release some cash from it. It could be a very expensive car that has no finance attached, which they would ask you to downgrade to a less expensive model.
Items used for day-to-day living (including required medical aids) and the tools and vehicles needed by you if you are self-employed are exempt if they are not worth over £1000.
Can the DAS be cancelled?
If you are made bankrupt or if the Debt Arrangement Scheme administrator or creditor make an application for it to be cancelled, you DAS will be revoked, but they will talk to your money adviser long before this happens to keep your informed.
What if I can’t keep up payments on my payment plan?
If you have a long DAS it is expected that your circumstances may change and how this is dealt with has been built into the rules. Your money adviser can apply to the Debt Arrangement Scheme administrator to vary the terms of your payment plan. Again, if these changes are fair and reasonable, you should still be able to continue with your plan.
Can your creditors still bankrupt you?
They cannot take any action against you as long as you keep up the payments under the DAS. A DAS even cancels actions such as earnings arrestment and property attachments if you have not reached the auction stage.
Can your creditors stop your DAS being approved?
If your debt payment plan (DAS) is fair and reasonable, your money adviser will still go ahead and send your DAS for approval. Some creditors try to deliberately difficult which is neither to their benefit or yours, which is why Debt Arrangement Scheme has a ‘fair and reasonable’ rule built in.
What debts are not included?
Only child support arrears and benefit deductions cannot be included. Child support is a considered a ‘continuing priority’ liability and debt and a DAS cannot protect against enforcement of arrears. Direct deductions made from your benefit such as council tax debt, fines, social fund loans or benefit over-payments cannot be included for the same reasons, although if you stop claiming benefits these debts can be included.
Are mortgage or rent arrears eligible dents under Debt Arrangement Scheme?
Debt Arrangement Scheme covers many debts including mortgages and rent arrears, but normal monthly mortgage payments are not included. To be registered with Debt Arrangement Scheme you must still be able to meet your regular monthly mortgage payment.
Will I have to sell my home in a DAS?
If you have a lot of equity in your home, your money adviser or Debt Arrangement Scheme administrator may request you re-mortgage to release some cash to creditors. However, it is unlikely you will be asked to sell your home.
Will a Debt Arrangement Scheme affect my Credit Rating?
A Debt Arrangement Scheme is approved it will then be added to the register of insolvencies. This register can be viewed by the public and credit reference agencies. It can affect your credit score for up to 6 years, however you will be able to rebuild your credit score once its complete.
How does a Debt Arrangement Scheme work?
A Debt Arrangement Scheme is a formal arrangement between you and your creditors to pay back your debts over a longer period. Any charges are frozen during the period to prevent your overall debt from increasing.
How can I apply for a Debt Arrangement Scheme?
Simply use our free online calculator to see if you qualify for a Debt Arrangement Scheme. Then one of our DAS advisors will call you and run through the application over the phone. We will then propose your application formally to your creditors. A Debt Arrangement Scheme can be setup in as little as a few days.
Note: Debt Arrangement Schemes can only be setup by qualified Money Advisors.
Trust Deed Example
Example Unsecured Debts
|2||Credit card 1||£6,812|
Your Monthly Repayments Would Be
a Scottish Trust Deed £748
(total contractual repayments)
a Scottish Trust Deed £295
(total contractual repayments)
* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here