The Business Debt Arrangement Scheme was introduced by the Scottish government in 2014, and helps businesses run by sole traders, as well as partnerships, trusts, and unincorporated bodies, to repay debt over an extended period of time.
The procedure isn’t available to limited companies and limited liability partnerships, which have access to their own debt solutions. A debt payment plan is a key aspect of a Business DAS and must be adhered to throughout the term, which can last for a maximum of five years.
So how does the Business Debt Arrangement Scheme work, and could it be suitable for your business?
In a similar way to the personal Debt Arrangement Scheme, a Business DAS involves repayment of the entire amount of debt rather than a proportion of the money owed being written off. This is beneficial for those involved in a Business DAS, as it doesn’t involve declaring outright insolvency.
As we mentioned earlier, a debt payment plan allows a business to make affordable debt repayments for up to five years. Once the arrangement is agreed and in place, further interest and charges on the debt is frozen as long as repayments are made according to the terms and conditions of the agreement.
If the Business Debt Arrangement Scheme is successfully completed, the interest and charges that have been frozen are written off and the business becomes debt-free. During the term, all forms of creditor legal action are disallowed so the business can carry on trading and attempt to repay its debts without the threat of closure.
The personal Debt Arrangement Scheme involves an approved money adviser who assesses an individual’s financial circumstances, but in the case of a Business DAS the money adviser must also be a licensed insolvency practitioner. This ensures that the business is viable, and is likely to be able to meet the repayment demands.
The business must also be able to keep up with ongoing liabilities in addition to repaying its debts - determining whether this would be possible is also an important part of the insolvency practitioner’s role in the process.
Your business’ viability needs to be assessed by a licensed IP, and if it’s eligible for a Business DAS a debt payment plan will be formulated based on the financial information provided.
The Business Debt Arrangement Scheme clearly offers many benefits to businesses experiencing financial difficulty. For more information on the Business DAS and whether it might be suitable for your business, please contact one of our licensed insolvency practitioners at Scotland Debt Solutions to arrange a free same-day consultation.
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Our Scottish based team can help advise you on your debt problems.