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What is a Debt Arrangement Scheme (DAS)?

A Debt Arrangement Scheme (DAS) is a government-backed scheme designed to help people repay their debts over an agreed amount of time without the threat of legal action. The aim of the scheme is to allow you to pay what you can afford at regular intervals based on your disposable income whilst freezing any interest, fees, penalties at the start and then waiving them upon completion. 

Debt Arrangement Schemes (DAS) are available to anyone in Scotland who is finding it difficult to cope with and pay back the debts they owe to any number of creditors.

The schemes are backed by the Scottish government and they were introduced through legislation in 2004. They were created to offer individuals protection from court actions by creditors and a means of managing their unsecured personal debts more effectively without the need for any declaration of insolvency.

How do Debt Arrangement Schemes work?

Debt Arrangement Schemes are designed to function in a way that helps people find a way out of their debt management problems and towards a healthier and more sustainable financial positon.

Unlike with sequestration and Trust Deeds, a DAS does not involve outright insolvency or negotiations around what proportions of a person’s debts are to be paid back and what will be written off. Instead, a DAS is based on the formation of a Debt Payment Program (DPP), which outlines a plan for how a person’s debts will be paid back in their entirety over a specified period of time.

A key figure in that process is a DAS Approved Advisor, whose job it is to liaise with creditors and debtors in a way that means an agreement around a DPP can be reached among all the relevant parties.

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Why is entering a DAS a positive step?

If your personal debts are mounting up and you are steadily losing control over your finances then it is always advisable to take action to arrest your slide along what can be a very slippery slope. Different debt management options are available and more suited to particular situations but Debt Arrangement Schemes are a relatively straightforward way to get a firmer grip on your finances.

Because a DAS is backed up by government legislation in Scotland, it provides legal protection from creditors and peace of mind to the individuals involved. Although a DAS does not reduce the actual amount of money that a person owes to their creditors, its stipulations include a freeze on all charges and interest relating to debts previously accrued.

Who is a DAS designed to help?

Debt Arrangement Schemes are generally aimed at people who have a regular income and who can feasibly afford to pay back their debts but who are feeling the pressure and the strain of their debts mounting up. A DAS should work for anyone who has some disposable income after they’ve paid their living expenses and who wants to pay off their existing debts routinely over a period of time without being consistently hassled by creditors.

So a DAS could be right for you if you’re keen to buy yourself some time to improve the state of your personal finances and if you can pay your debts eventually but not right away. If, realistically, you are not in a position to ever resolve the debts you have in full then you will want to look instead towards your options around Trust Deeds or sequestration.

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Putting together a Debt Payment Plan

The creation of a Debt Payment Plan that can be agreed upon by both debtors and creditors is a vital part of the process as far as Debt Arrangement Schemes are concerned. The first point of order is to establish precisely what amounts are owed to which creditors by the individual aiming to officially enter a DAS agreement. From there, your DAS Approved Advisor will go through and scrutinise your ability to pay back the amounts you owe in light of your income and your everyday outgoings.

The aim of a DAS is to give indebted individuals a certain amount of breathing space with regard to their debts without resorting to sequestration or a Trust Deed. On the other side of the equation, creditors can at least be assured that the money they are owed will be recovered under the terms of a DAS deal.

Quite how long it might take to pay back debts while a DAS agreement is in place will vary from case to case. However, the idea is to establish a pace of repayment that has a realistic chance of being adhered to on the part of the debtor. A decision on what is or isn’t realistic in each instance is down to the judgement of your Administrator but affordability is a key aspect of the equation as any DPP is put together.

How does a DAS work in practice once agreed?

Once all the terms of a DPP are agreed in principle then there should be a single figure amount that the debtor is obliged to pay out as a lump sum every month.
This amount is calculated using the Common Financial Tool, a calculator set down in legislation to assess affordable contributions. These amounts can be settled through Standing order payments, via an ordinary payment card of any kind or through employer payment mandates. The funds themselves will be transferred as a single amount by the debtor as agreed and then passed on to all the relevant parties’ designated Payments Distributor. (Begbies Traynor (parent company of SDS) is a designated Payments Distributor; therefore any cases generated by us will see us act as the Payments Distributor).

As long as you keep up with the repayment terms you’ve agreed with your creditors then they will not be allowed to add any charges, interest or fees to the amount you owe. And then once you have paid back all the money you owe, you are released from the terms of your DAS and the scheme is ended.

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Payment breaks

If you need a break from paying your creditors back while you have a DAS in place then it is best to explain your situation and how you intend to resolve it to you DAS Approved Money Advisor. By doing so, you can arrange a break of up to six months should you meet the specified criteria, with that period then added to the intended end date for your agreement so you can catch up and complete the terms of your scheme. You are able to apply for more than one payment break should you circumstances require this.

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Failing to pay

If your levels of disposable income are significantly depleted or you have a change in circumstance then you will have a good case for applying for a variation in the However, if you simply fail to pay back money to your creditors as agreed then you will probably find that the agreement is terminated within a matter of a few months. If you miss three payments throughout the duration of your DAS this is grounds for revocation.

Under these circumstances, not only will you find that your creditors return to charging fees and interest on top of the amounts you owe them, but you could also see them retroactively imposed.

Advantages of a Debt Arrangement Scheme

The key benefit of entering a Debt Arrangement Scheme for anyone is the prospect of establishing what might be much-needed respite from a worsening debt management scenario. Being able to put a halt to the process of seeing your debts mount up is a great relief for thousands of people who enter a DAS in Scotland every year.

In addition to affording yourself more time to pay off the debts that you owe through a DAS, you’re also ensuring that your debts don’t get any worse in the meantime. All of which opens up the prospect of becoming debt free, which for many people, without the right help and support, could remain a distant and seemingly very unlikely ambition.

Plus, entering a DAS is a positive means of tackling debt problems before they become so onerous as to be insurmountable without the need to enter an insolvency process such as sequestration. And, while the need for a DAS might reflect a level of financial difficulty, it also demonstrates a willing to address the underlying issues and move forward in a more positive fashion.

Also, with a DAS in place, you will not be charged any extra interest or fees by your creditors and they should only communicate with you about the money you owe through a third party whose interests are only in seeing the terms of a DPP adhered to on both sides. So debtors can be relieved of the day-to-day pressures that go along with having multiple creditors and no means to pay them all back at once.

Disadvantages of a Debt Arrangement Scheme

One key disadvantage or downside of entering a DAS is that doing so will negatively impact your personal credit score. The reason for this is that, although you are not avoiding any debts you’ve accumulated, you are arranging to pay them back at a later date than you initially agreed.

Another point about a DAS which some people may find difficult is that a debtor cannot take on any more unsecured debts of any kind while their repayment plan is in place, unless it is allowed by the DAS scheme’s administrator.

Debt Arrangement Schemes help people from across Scotland pay back millions of pounds in unsecured debts every year but the repayment process can take a long time. For most people this is taken as a positive but if you are keen to become debt free in a short period of time then a DAS is not for you.

A DAS and your assets

One of the foremost advantages of Debt Arrangement Schemes is that they enable individuals to pay back the debts they owe to creditors without having to forego ownership rights to assets of value. In that regard the schemes differ crucially from both Trust Deeds and sequestration, both of which are forms of insolvency and mean that a person has to try to find any means they can of paying back creditors.

It might not always be the case that with a Trust Deed or sequestration you have to sell your home or your car to satisfy your creditors but it is a very real possibility, which is not the case with a DAS. All which makes a DAS a much more appealing debt repayment solution for most people.

The timing, though, is important because when your debt problems reach a point of being totally unsustainable then you might find that entering a DAS is no longer an option.

Getting the right advice

As ever with serious personal finance decisions, when you’re considering your options around Debt Arrangement Schemes, it’s very important to get the best possible advice and support from specialists in the field. There can be tough choices to be made and it’s essential to be aware of all the facts and all the options available, whatever the nature of your concerns might be.

Scotland Debt Solutions has a team of DAS Approved Money Advisor who can help you get to grips with your finances and arrange the details of a DAS if it’s the route that’s right for you. Call us today to arrange a free consultation.

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FAQ

FAQ on Debt Arrangement Scheme (DAS)

Are any debts excluded from DAS?

Debts that will not form part of your Debt Payment Program include: Some secured loans Student loans Court fines

Does DAS provide protection from creditors?

Yes, this is one of the reasons why the Scottish government introduced the scheme. As long as payments set out in the Debt Payment Program are met, creditors will not be able to make contact or take legal action against you. All correspondence is dealt with by your DAS Approved Advisor.

How does the Debt Arrangement Scheme work?

A DAS Approved Advisor reviews your income, assets and liabilities to make sure it is the right product for you. A Debt Payment Program is then drawn up which takes into account your household expenses such as rent, food and utilities, and sets out how much you need to pay against your debts each month, and for how long. This ensures that your living expenses are covered, and that debts are consolidated into a single affordable payment.

What are the advantages of a Debt Arrangement Scheme?

You have more time to pay off your debts Interest and fees are frozen once a Debt Payment Program has been agreed Your creditors are not able to take any further legal action Debts are consolidated into a single payment that you know is affordable because your financial situation has already been reviewed by a professional money advisor Escalating debts are halted, providing some relief from stress You can avoid full insolvency as you will still be paying your debts in full

What are the disadvantages of DAS?

The Debt Arrangement Scheme, like any debt management product, may affect your credit rating. If you enter into a DAS then your details will be recorded on the DAS register. This is a register which can be accessed free of charge. Creditors and credit reference agencies check this register on a regular basis and may update your credit file to reflect this information. While you have a Debt Payment Program under DAS, you will not normally be able to access additional credit. There are exemptions to this which your money adviser can further explain.

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