The Debt Arrangement Scheme (DAS) is a debt management solution available to residents of Scotland who are struggling to repay unsecured debts.
DAS allows individuals to repay their debts over an extended period of time through debt payment programmes, while protecting them from creditor legal action.
In this article, we will cover everything you need to know about the Debt Arrangement Scheme, including its eligibility requirements, application process, benefits, and drawbacks.
What is the Debt Arrangement Scheme (DAS)?
The Debt Arrangement Scheme, or DAS, is a debt solution created by the Scottish Government.
It was designed as a way to help people who are struggling to pay back their debt to do so in a more manageable fashion.
Only available to those living in Scotland, DAS allows you to apply for a ‘Debt Payment Programme’ (DPP).
This is what helps you to make regular affordable payments to your debts for a reasonable amount of time.
There is no minimum or maximum amount of debt to be able to apply for this solution – but you do need to owe money to more than one company/person – and you need to apply through a licensed money advisor.
Your DPP will last as long as it takes to clear all of the debts that you choose to include, although usually this is capped at 10 years unless agreed by your lenders.
All interest and charges are frozen during this time and lenders are no longer able to take any action against you.
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Unsecured debts
Most unsecured debts can be included in a DAS, including:
- Credit card debts
- Personal loans
- Store cards
- Payday loans
- Overdrafts.
Secured loans cannot be included in a Debt Arrangement Scheme (DAS) as they are backed by collateral, such as a car or a property, and the lender can repossess the asset if the borrower fails to make repayments.
It’s important to note that there are some debts that cannot be included in a DAS, such as court fines, child maintenance payments, and certain types of student loans.
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How much does DAS cost?
There are costs associated with the Debt Arrangement Scheme (DAS), including a set-up fee and ongoing costs for the Debt Payment Programme (DPP).
DAS set-up
Getting advice about a DAS or DPP is usually free, but you may be charged a fee for setting one up depending on what company you choose.
This used to be 10% of every payment you made into your arrangement.
However, due to legislation changes proposed by the Accountant in Bankruptcy (AiB), this solution became free to all who use it on Nov 4, 2019, and all fees will instead be charged to the lenders included.
This means what once your Debt Payment Programme is approved, every penny you pay will go towards the balances owed.
Debt Payment Programme (DPP)
The ongoing costs of the debt payment plan will depend on the amount of debt and the length of the repayment period, but are generally around 2-4% of the total debt per year.
Your disposable income will be taken into account, and costs are deducted from the monthly payments made by the debtor and are distributed among the creditors.
It’s worth noting that the costs associated with DAS are regulated by the Scottish Government and are designed to be fair and reasonable.
DAS advantages and disadvantages
As with all debt solutions, it’s important to be aware of the advantages and disadvantages of the DAS before considering entering one.
Advantages of a Debt Arrangement Scheme
- Protects assets like cars and homes from sale during debt repayment.
- Freezes interest and charges on included debts for financial relief.
- Payments tailored to affordability, avoiding excessive financial burden.
- Prevents creditors from taking further legal action once approved.
- Successfully clears debts upon completion, providing a fresh financial start.
Disadvantages of a Debt Arrangement Scheme
- DAS is a long-term debt repayment plan compared to other solutions.
- Public registration of arrangement on DAS register affects privacy.
- Impacts credit rating for six years, hindering future borrowing.
- Limited access to credit while in the payment programme.
- No debt write-offs with a DAS as debt amount must be repaid in full.
The DAS process
Entering into a DAS is straightforward, however, it’s important to be aware of the process to make things as simple as possible.
Seek advice from a DAS approved money adviser
The first, and perhaps the most important step in your DAS journey, is to decide if it’s the right solution to your situation.
The best way to do this is to speak to a money advisor, who will be able to give you all the relevant information need to help you.
If you then decide that this is the route you want to go down, the advisor will go through all your income and expenditure to calculate how much you can afford to pay.
This will form the basis of your proposal.
Make your DAS Application
Now that you’ve reached this stage, your money advisor will draft up a document detailing the arrangement you wish to propose.
This will then be sent to your lenders for them to consider and either approve or reject. They will have 21 days to do this – however, thanks to the new legislation mentioned above, applications are now automatically approved even if lenders do object.
There is a catch though. Any rejecting lenders have to account for less than 10% of your overall debt level – but that doesn’t necessarily mean you’re out of luck.
If you end up in this situation, your application will then be sent to the DAS Administrator.
It will then be down to them to decide whether your proposed arrangement is ‘fair and reasonable’ – which, if they do, will ultimately then mean your DPP will get approved.
Making your monthly payment
Once your DPP has been approved, all you need to do is make your regular payment for the agreement length of time.
Your details will be posted on the DAS register which will then be noted on your credit file.
Your arrangement will be passed to a payment distributor, who will be in charge of spreading your payments between all of the companies/people included.
Interest and charges are then frozen on these debts. Lenders will also no longer be able to take any further action against you at this stage.
What should I do if my circumstances change during my arrangement?
It’s important to remember that the purpose of the DAS is to provide a sustainable debt solution, so it’s important to keep your money adviser informed of any changes in your circumstances to ensure that your arrangement remains viable.
If your circumstances change during your Debt Arrangement Scheme (DAS), it’s important to inform money advisers as soon as possible.
You may be required to complete annual reviews of your arrangement with your money adviser to ensure that your payments are still affordable and sustainable.
If your affordability changes at any point, you may be eligible for a payment break, also known as a payment holiday, which can provide temporary relief from making payments.
This will depend on your individual circumstances and whether your adviser considers it appropriate.
What happens at the end of the debt payment plan?
Once you have made all your payments to your DPP, you will have cleared your debts in full.
Lenders that were included are no longer able to hold you liable for the debt you owed and they cannot come after you with penalties or charges.
The details of your DAS will be removed from the register and issue the lenders with paperwork confirming that your debts are now satisfied.
It is then up to the lenders to update this on your credit history.
As far as the DAS showing on your credit report goes, a copy of your completion paperwork will need to be sent to the credit reference agencies to update this.
It will then show at satisfied on until a year after you have finished the DPP – at which point it will fall off altogether.
Can you end your DAS early?
Yes, it is possible to end your Debt Arrangement Scheme (DAS) early by making a lump sum payment to your creditors.
If you receive a lump sum of money
If you are able to pay off your debts in full, or if you receive a windfall or inheritance, you can use this money to make a lump sum payment towards your DAS.
This will allow you to pay off your debts more quickly and end your DAS early.
It’s important to note that you may be required to pay any outstanding fees or costs associated with your DAS before it can be terminated.
If you are considering ending your DAS early, it’s important to speak to your money adviser first to discuss your options and ensure that it’s the right decision for your individual circumstances.
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Where can I get advice on DAS as a debt solution?
Being in debt can be a daunting and stressful experience, leaving you feeling overwhelmed and unsure of what to do next.
However, there are several debt management solutions available that can help you work towards a debt-free life such as Trust Deed’s .
At Talk About Debt, our advisors can guide you through the process of dealing with your unaffordable debts, whether you’re interested in a DAS, an IVA, or other debt management solutions.
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