Why a Debt Arrangement Scheme is better than a Debt Management Plan

June 20, 2017

If you’re struggling to repay debt and looking for a way to better manage the situation, you may have come across two commonly-offered options. Both involve repaying all the money you owe rather than writing off a proportion of the debt after the end of the agreement, but one is backed by the Scottish government.

The Debt Arrangement Scheme (DAS) is a debt solution unique to Scotland. It lowers your monthly repayments to an affordable level, and is legally-binding for you and your creditors although there is some flexibility built-in.

The other option, a Debt Management Plan (DMP), has a similar structure to DAS but it is an informal arrangement.


When you have several credit cards and store cards at their maximum limit and you’re only making the minimum payments each month, additional interest and late-payment charges can quickly make your situation untenable.

Add to that any personal loans you’ve taken out, plus arrears of council tax and household utility bills, and you have a debt situation that’s difficult to escape. Both the Debt Arrangement Scheme and Debt Management Plan are designed to help you repay unsecured debt, so what makes the Debt Arrangement Scheme a better option?

An official debt management solution

DAS is an official, government-backed scheme that helps people with a regular income and who are in debt, to repay what they owe over a longer period of time. An approved money advisor works with you to formulate a Debt Payment Plan (DPP), and this is presented to your creditors for approval.

A Debt Management Plan, on the other hand, is arranged and administered by a representative of a debt advisory organisation, and is an informal arrangement with creditors to repay the debt in full.

Its unofficial nature introduces a range of issues that could hamper your attempts to escape debt. These include:

Protection from creditor legal action

The fact that DAS offers you legal protection from creditor action is one of its main advantages. You’re protected from any legal action whilst the arrangement is in place, as long as you comply with all the terms and conditions.

As far as a Debt Management Plan is concerned, although it isn’t necessarily in your creditors’ interests to take legal action against you, there is nothing to prevent them from taking you to court even if you fully adhere to the agreement throughout its term.

Built-in flexibility

A downward turn in your circumstances, such as job loss or long-term illness, could trigger legal action by one or more of your creditors, but DAS is structured in such a way as to protect your interests.

If you did lose your job, your money advisor would renegotiate the terms of your agreement to account for the loss of, or drop in, income. You may even be able to take a payment break of up to six months.

With a DMP, your creditors are able to demand changes whenever they choose as it is not protected by law – this can easily derail your long-term financial plans.

Freezing interest and charges on your debt

One of the overriding benefits of the Debt Arrangement Scheme is that creditors must stop adding interest and charges to your debt once it is in place. Additional interest and fees on top of an already burgeoning debt problem can be the tipping point for many people, forcing them into insolvency and a more complex path to escape a stressful situation.

If you take out a DMP, you’ll probably find that most of your creditors will agree to freeze the interest, but they are not prevented from doing this by law. In theory, they could decide to apply interest and charges on their debt at any time, and some may even do so from the start.

Communications with creditors

Having to communicate with creditors can be extremely stressful, and many people in debt live in fear of the next phone call. The Debt Arrangement Scheme allows you to step back and let your money advisor deal with creditors, so you can focus on improving your financial future without the additional stress.

A Debt Management Plan doesn’t incorporate this valuable aspect, leaving you open to creditor contact and potential harassment in the form of letters, emails and phone calls.

Protection for your most valuable assets

As long as you continue to make the agreed payments in full and on time, valuable assets such as your home and car will be protected by the Debt Arrangement Scheme.

Under a DMP, creditors could take action involving your property, such as an inhibition order. This ‘attaches’ the debt to your home so that you wouldn’t be able to sell it or remortgage without repaying your debt from the proceeds.

A fixed-term arrangement

If you decide to use the Debt Arrangement Scheme you’ll know exactly when it finishes, and for personal debts it can last for up to ten years. This is both motivating and encouraging as you’re able to see an end to your financial troubles, and plan further ahead for the future.

A DMP has no fixed end-point, and in theory could continue for decades. Your creditors may decide to add interest and other charges to the amount owed at any point during the arrangement, leaving you exposed to a seemingly endless period of repayments.

Being government-backed, the Debt Arrangement Scheme is structured in such a way that it helps you repay unsecured debt without the worry of creditor legal action. It is a better option that works in your interests, providing the security and flexibility you need to recover from serious financial problems.

If you would like to know more about the Debt Arrangement Scheme and how it would work for you in practice, or indeed any other debt solution in Scotland, call our expert team to arrange an initial meeting free-of-charge. Scotland Debt Solutions has been helping Scottish residents out of debt since 1989, and operates from five offices around Scotland.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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