Are you in debt and looking for a way out of it? If so, then you may be interested in learning about the Debt Arrangement Scheme.
The Debt Arrangement Scheme: What Is It?
The Debt Arrangement Scheme, also known as DAS for short, was introduced in 2004. The Scottish government introduced it as a statutory debt management tool to help people who have debts that they need to repay over a reasonable period of time.
In 2011 the government updated the legislation, and then it was updated again in July 2013.
People who decide to participate in DAS can apply for a Debt Payment Programme, also known as DPP for short.
A DPP allows you to pay off your debt(s) free from interest, fees and charges over an extended period of time, ensuring payments are set at an affordable level whilst giving protection against any legal action from your creditors and safeguarding assets like your home.
Do I Qualify For A DAS?
In order to qualify for DAS, you will need to meet the following criteria:
- You must reside in Scotland
- You have to have at least one or more debts
- After you meet your normal living costs, you should have a reasonable level of surplus income left over
- You must not be bankrupt, nor should you be in a protected trust deed or subjected to bankruptcy restrictions
All debts can be included with the exception of court fines, child support payments and social security benefit repayments. Mortgage/secured loan arrears can be included. Please note, ongoing mortgage/secured loan payments cannot be included and you must continue to make these out with the DPP.
DAS: How Does It Work?
You will need to speak with one of our advisers, and you will need to tell them about your current financial position. Once they have an understanding of your situation, they will be able to let you know what your options are.
If you decide to participate in DAS, the programme will allow you to pay your creditors back over a reasonable period of time, normally up to 10 years.
However, the actual length of time you have to pay your creditors back will be determined on how much debt you have, as well as how much money you can afford to pay.
When a DPP under DAS is proposed to your creditors, then it is done so in the following way:
- The proposals are sent to your creditors. They will take a look at them and they can either accept them or object to them. They have 21 days to respond.
- The DPP will be approved if nobody objected to them.
- The DPP can still be approved in the event that one or even more creditors object to them, but the proposals will have to be deemed ‘fair and reasonable’. The DAS Administrator will make this decision.
- The DPP may also be varied to accommodate any changes in your circumstances throughout the period of your DPP.
- Your continuing money adviser will produce an alternative debt payment plan by evaluating your current situation and then they will send the amended plan for approval.
- If the varied proposal is deemed fair and reasonable, then your DPP should be approved, either by creditors or the DAS Administrator.
- If your DPP is refused, then you can appeal the decision. However, it may be worth looking at your other options, including bankruptcy or a protected trust deed.
Only qualified money advisers can advise on and manage a DPP under DAS. A money adviser can be from the free advice sector, for example with your local Citizens Advice Bureau or local authority money advice team, or an insolvency practitioner (or a suitably qualified member of his/her staff) can act as a money adviser for DAS.
The free advice sector advisers will not charge a fee for their services whereas the insolvency practitioner will normally charge a fee.
You can also intimate your intention to apply for a DPP under DAS. This gives you protection from your creditors for a 6 week period, therefore, giving you the time to take advice and prepare your application.
In this 6 week period, your creditors cannot take legal action against you for recovery of their debts. You can only make one such intimation in any 12 month period.
Once the DPP is approved you will benefit from a removal of the pressure caused by creditors, as well as being able to live a more normal life knowing that your debts are being dealt with in a more manageable way.
DAS: The Advantages
- It is legally binding on your creditors and is supervised by the Scottish Government (unlike an informal Debt Management Plan which creditors can choose to end at any time)
- Your creditors are stopped from taking any further legal action against you to recover their debts
- Any arrestment on your wages that is already in place will cease to have effect on approval of your DPP
- You make one affordable payment normally on a monthly basis which is distributed on a pro-rata basis between all of your creditors.
- DAS freezes all interest, fees and charges on your debt from the date your DPP application is made and these are written off when the DPP is completed
- Any assets you own are excluded, including your home, even if there is equity
- Creditors that reject the proposals can be forced to comply with the arrangement if it is judged to be “fair and reasonable” by the DAS Administrator
- It is possible to set up a joint DPP, the joint applicants do not need to be jointly and severally liable for any debts
- It is possible to set up a single debt DPP
DAS: The Disadvantages
- If you do not comply with the conditions of the DPP then it may be revoked. If this happens then your creditors are free to pursue legal action and to add back on their interest, fees and charges.
- Your credit rating may be adversely affected
- There is no debt being written off, only relief from further interest, fees and charges, therefore a DAS may take significantly longer to complete than an insolvency option such as a Protected Trust Deed or Sequestration.
DAS: How Much Does It Cost?
A money adviser who works in the private sector will likely ask you to pay a one-off advice/set-up fee. You may also be charged a management fee that you will pay on a monthly basis.
There is a way you can apply for a DAS for free, but you will need to contact a free advice sector money adviser. Your adviser will provide more information should you agree to a meeting following our initial contact and you will be provided with a list of all non-fee charging money advisers.
What Happens To Your Car And Home When You Have A DPP Under DAS?
If you make your payments to your mortgage, as well as secured loan payments, then your home will not be affected. This is even if you have a lot of equity in your property.
Under this scheme, you are paying your debts back in full, that is why it is different to an insolvency procedure and can mean you do not include any of your owned assets.
It’s also worth mentioning that if your mortgage is in arrears, then you may be able to include the arrears in the DPP.
As for your car, it will not be affected when you enter into a DAS. If your car is financed, then you will be able to include the monthly finance payment as an expense when your DPP payment is calculated.
You can read our FAQs if you want to learn more about what happens to your assets.
A married couple with two kids. The man is working full-time, while the woman is a stay-at-home mum.
The man has debt, around £7k, while the woman has about £4k, and they have £5k in council tax arrears, but it is a joint debt. This means there is around £16k in debt in total.
The couple were paying their debts off, but only making the minimum payments, which is £300, but the high interest rates caused the outstanding balances to be paid off very slowly.
However, the man’s wages were arrested because the council tax was not paid and the amount arrested was £200, this meant that the couple could only afford to pay £100 per month towards their other debts, and not £300 per month as before.
As such, they needed financial and the solution is that they decide to apply for a DPP under DAS. Once agreed, the arrestment stops and they can afford to pay £270 per month to their creditors, with monthly fees of £30 per month. Everything will be paid off within 5 years.
In this example, there is a man who works full-time and he is single. He owns a home that is worth around £140, with an outstanding balance of £80k. He also owns a vehicle valued at approximately £7k, but he didn’t want to sell his home or car because he has a parent that lives nearby and he helps them get around.
As for unsecured debts, he owes about £25000, and the most he can pay back is £350 per month. He decides to go through a Debt Management Company and try to set up a payment plan with his creditors.
However, one creditor rejects his proposal and they insist that he just pays them all of the money in full or they will take legal action against him. The man tries to remortgage his home, but he fails.
The solution is he sets up a DAS and pays around £315 per month. This means he could have his debt paid off in about six years.
His car, as well as his home will not be affected.
As for the creditor who rejected the proposal, they were forced to accept the arrangement because it was deemed fair and reasonable by the DAS Administrator. The creditor cannot take any further action against the man, if he abides by the conditions of his DPP.
Debt Arrangement Scheme FAQs
What Is DAS?
It is short for Debt Arrangement Scheme, and the Scottish government introduced it because it wanted to help people repay their debts. Under DAS, people can apply for a DPP, short for Debt Payment Programme.
This allows consumers to pay their debts by making one payment per month, and the payment is distributed among their creditors.
Do You Qualify?
You may be eligible to participate in DAS if you meet the following criteria:
- You live in Scotland
- You have one or more debts
- You have a reasonable level of surplus income after meeting your normal living costs
- You are not bankrupt, subject to a bankruptcy restrictions order or undertaking, or in a protected trust deed
Can Only Individuals apply for a DPP under DAS?
Couples can also apply for a DAS DPP, via a joint application, regardless of the existence of any jointly owned debts.
What Is A DAS DPP?
The DPP is a programme designed to help you pay your debts, and you agree to the programme under the DAS scheme. Basically, it will set out how much money you can afford to pay your creditors on a monthly basis, as well as how long it will take to pay the debts completely off.
Once the agreement is set in stone, you and your creditors will be bound by the terms.
How Long Does A DPP Last For?
It depends on a few factors, but everyone’s situation and circumstances is different. A DPP can last as long as is necessary to repay your outstanding debts. It depends on how much you owe and how much you can afford to pay each month
How do I make a DAS application?
The very first thing you need to do is to contact us, and we will give you advice that will allow you to do decide if DAS is the best option for you to go with. If it is the best option, then your money adviser will help you come up with a DPP proposal, this proposal is then presented to your creditors for their acceptance.
Are You protected While The Application Is Being Reviewed?
You will be able to submit what is known as an ‘intimation’ – this will allow you to be protected from enforcement actions by your creditors for a period of up to six weeks. You can only submit a single imitation in any 12 month period.
How Does A DAS DPP Get Approved?
Your creditors have 21 days to respond to the proposals, and they can either accept or reject them. However, if one or more creditors reject the proposals but they are deemed fair and reasonable, and/or your creditors do not respond within 21 days, then it will be approved.
Upon approval, you and your creditors will have to comply with it.
What Does Approval Mean?
Approval of a DPP means that your creditors will not be able to take legal action against you, such as causing you to go bankrupt or seeking to arrest your wages or even money from your bank account. As long as the DAS DPP is place, the protections will remain.
You must make your payments on a monthly basis and stick to the conditions of the DPP.
I Have An Arrestment On My Earnings. Does This Stop?
Once the DPP is approved, the arrestment stops. Your adviser will make sure this happens.
The Fair And Reasonable Test: What Is It?
It is criteria that the DAS Administrator will use to determine whether an application is approved or denied. Some of the factors that will play a role in the decision are the length of time the DPP will last for, as well as the reasons why your creditors have rejected the DPP.
If we do not think your proposals will pass, then we will let you know and we will find out if there is another option available for you.
What Is A Continuing Money Adviser?
It is an adviser who will act on your behalf during the length of the DPP. They will guide you and provide advice to you throughout your DPP. There are criteria that need to be met before someone can become a continuing money adviser.
Who Is The DAS Administrator?
It is a Scottish government official (Accountant in Bankruptcy), who oversees the administration of every single DAS DPP. They are also responsible for keeping records of all DAS casework as well as approving DPPs, payments distributors and money advisers.
What Is The DAS Register?
It is a public register and everyone has access to it. They don’t have to pay anything to access it, and people can view it to find out who has applied under DAS or if they have been approved for a DAS DPP. A person’s name, home address, and date of birth are all listed in the register.
What Is A Payment Distributor?
This is the firm responsible for distributing money paid into a DPP. Once a DAS DPP becomes approved then a Payment Distributor is appointed. They would contact you in order to make arrangements to collect your payments each month (eg. Direct Debit).
They will then distribute these funds to all of your creditors for you each month. You therefore only need to make one monthly payment to your debts regardless of how many creditors you have. The costs of your Payment Distributor are met by your creditors.
DAS: Does It Cost Anything
You will probably have to pay some fees if you decide to use a money adviser from the private sector. If you want to find out more about our fees, then you can learn more about them by contacting us.
It’s worth noting that if you apply for a DAS through a local authority money advice centre, then you will not have to pay anything.
How Much Money Will You Have To Pay Towards Your Debts?
It is entirely up to you how much you wish to offer to pay towards your debts under DAS. However, most creditors will expect you to pay whatever you can reasonably afford after your essential living costs are met each month.
Following legislation changes in July 2013, all money advisers in DAS now follow the Common Financial Statement (CFS) when calculating your surplus income.
What Is CFS?
It is short for Common Financial Statement and it is a budgeting tool. It is something that money advisers use when figuring out a person’s expenditure. The Money Adviser that you work with will use CFS, as it must be used in all DPPs under DAS.
Do You Need To Include All Of Your Debts?
No you don’t, it is possible to leave some debts out with your DPP. However, it’s worth noting that if you choose to do this, then your DAS DPP may not be approved.
Will Your Interest, fee And Charges Be Frozen?
A DAS will indeed freeze fees, interest and charges from the date you have applied for the DPP. As long as you complete the DPP, then charges, interest and fees will be frozen.
Do You have To Deal With Your Creditors Still?
The good news is no. You simply make one payment to the distributor and they will divide the money between all of the creditors. You just need to stick to the agreement and then you will not have to deal with your creditors, and they will not be able to take action against you.
If for some reason you are still being contacted by your creditors, then you should let your adviser know and they will stop it as soon as possible.
If Your Circumstances Change During Your DPP, Then What Happens?
One of the best things about a DPP is that it is flexible, and it can change when your circumstances change. Should changes happen, you are entitled, in certain circumstances to a 6-month payment holiday.
Will Your Credit Rating Be Affected?
The chances are your credit rating will be affected because creditors, as well as credit reference agencies may look at the DAS register. Your credit file may be updated because you are defaulting on your original agreements that you had with your creditors.
Will Your Bank Account Be Affected?
You may be able to use your current bank account, but you might have to get yourself a new bank account provider. This is usually true if you owe money to a bank that is going to be included in the DAS.
When The DPP Is Completed, What Happens?
When your DPP is completed, then your information in the DAS register will be removed. Your creditors will also be informed that you have paid all of your debts in full via the DPP.
INFORMATION REGARDING PROPERTY
Do You Lose Your Home?
Your home is not affected, so you will not lose your home as long as you maintain your mortgage payment and payments to any loans secured on it. The DAS was created because the government wanted to create a safe way for people to pay their debts back, without the risk of losing their homes.
In matter of fact, it should be easier for you to pay your rent or mortgage once your DAS DPP is approved. DAS is a great alternative to bankruptcy and other options that may put you at risk of losing your home.
Will Your Mortgage Or Rent Arrears Be Included?
If you wish to do so, then it is possible to do this.
Can You Lose Your Car?
Your car, just like your home, will not be affected when you enter a DAS DPP. However, you are free to sell your car to help you pay your debts off quicker, but this is not required.
Also, if your car is on a hire purchase, then you can still keep it, but you need to maintain your HP repayments.
Information Regarding Employment
Can Your Employer Find Out?
We don’t contact them, unless you wanted your payments taken right from your salary. However, if your employer accesses the DAS Register, then they can find your information. It is unlikely that employers would choose to search this register.
I’m Self-Employed, Can I Still Apply For DAS?
Yes you can, although if you wish to apply for any further trade credit additional to any pre-existing arrangements then you must give notice of your DPP in writing to the potential lender.
Will Your Employment Be Affected?
It is possible that your existing employment may be affected when you apply for a DPP. It can also affect future employment opportunities. If you have concerns about whether or not applying for a DPP will affect your work life, then you should contact your HR department or take a look at your employment contract.
You should also consider getting further legal advice if you work in the financial services industry, armed forces, licensed HGV driver, police or prison service. You should also seek further advice if you are a Chartered Accountant or if you belong to a recognized professional body.
When you speak with your adviser, they will let you know whether or not you should seek further advice.