A Debt Arrangement Scheme, DAS for short, is just one way of dealing with debt – but it’s a highly effective one for Scottish residents.
Set up back in 2004 by the then Scottish Government, it’s been a useful tool if you are thinking ‘how can I get out of debt?’, and it’s one that is available only in Scotland. It’s helped thousands of people get their finances and their lives back on track thanks to the many advantages that it brings with it.
There are plenty of them – here are our top 10:
1. Interest and charges are removed from your debt – you pay only the debt itself (NOT the interest and charges)
What’s really good about a Debt Arrangement Scheme (DAS) is that interest and charges are frozen from your repayments so you are reducing your debts without this huge burden.
As anyone who has large debts knows, the interest can be the toughest part of paying off debts – you can find yourself making interest-only payments to service your debts. Over time this can become overwhelming as the whole of your life and your focus are directing at keeping your head above water.
Being in this position puts you under real pressure and your day-to-day living expenses (from utilities to food and clothing) add to this. In fact, many people simply find themselves making the minimum payment to their credit cards because they simply cannot afford to pay any more.
The problem with all this is that it means you pay even more interest – and any hope of resolving the debt remains a distant and almost certainly unachievable prospect.
Being in a DAS removes this pressure and gives you the chance to get back on top of things.
2. You can protect and safeguard your assets with a Debt Arrangement Scheme (DAS)
You may have fallen into debt, but you’ve worked hard for things in life and you certainly want to protect your assets. Other debt repayment options such as bankruptcy or trust deeds may involve your assets being used to pay off your debts. These include, but are not limited to, your house and car(s) for example.
In particular, if you have a large amount of equity in your property, this will be one of the first things that an insolvency practitioner will look to realise to pay your debts. Your equity is the amount you would get after paying off your mortgage following the sale of your home.
You would then, of course, have to find somewhere else to live, which could be very difficult and may involve ‘downsizing’ or even mean that you have to look to the private rental sector – which could be expensive and difficult given the impact on your credit rating.
The good news is, in a DAS, you are protected from further debt recovery action by your creditors and your key assets are safeguarded as long as you continue to make payments as set out in your debt payment programme. This can be a big weight off your mind if you are in this position.
3. You can include your spouse’s/partner’s debts in a Debt Arrangement Scheme (DAS)
What’s also good is that you can enter a debt payment programme (DPP) either on your own or with your spouse, partner or civil partner, even without a joint debt. This is an important consideration to address all the issues surrounding your debt problems.
It’s no good solving your own immediate ones if those of your spouse or partner are going to continue to have an impact on your financial health. It’s better to get to the source of the problem and deal with everything at once so that neither of you has ongoing money worries.
And that’s a good thing for your relationship too – what price can you put on that?
4. You don’t have to deal with creditors – everything is done for you
Being in a Debt Arrangement Scheme means having a debt payment programme set up for you. As part of this, you simply make one payment into your debt payment programme which is proportionately split up among your creditors.
The debt payment programme can be for any amount of debt and the length can be anything up to 10 years, giving you more time to pay back what you owe. In some circumstances, the term can be beyond that and, of course, the term can be considerably shorter if you have the income to pay back what you owe sooner.
DAS is administered and overseen by the Accountant in Bankruptcy (AiB). The Accountant in Bankruptcy is responsible to but independent of the Scottish Government. DAS is accessed through approved money advisors who submit applications to the AiB for debt payment programmes on behalf of you the client. It is the role of the money advisor to approach each of your creditors.
As soon as proposals are submitted to your creditors, interest and charges are frozen and you are protected from any further creditor enforcement action against you.
Your money advisor seeks each creditor’s agreement to the proposed DPP. They have 21 days in which to respond to the proposal; if they do not respond within that period, they are deemed to have agreed to the terms and the DPP is approved.
Even if some creditors do object, the DAS administrator can still approve a proposed DPP as long as it meets qualifying criteria and can be deemed to be fair and reasonable.
When the DPP is approved and in operation, you simply make one single payment each month to the approved payments distributor, who then pays each of your creditors a proportion until each debt is settled. You don’t need to have any contact with your creditors.
5. You will be able to get your finances and your life back in order – and do more things…
Being in Debt Arrangement Scheme allows you to overhaul so many areas of your life. You are now on track to a better financial future and have more possibilities.
Based on the fact that you have one payment to make, which may be considerably lower than the amount you were previously paying to cards, bank overdrafts etc, you might decide for example to review other areas of your life such as subscriptions or shopping habits to make further savings. It’s all up to you of course.
If you have an increase in your income, you might choose to make higher contributions to your DAS or to put the money to another use – such as a holiday.
Such possibilities will have been out of the question before you got your DAS, but having your DAS and debt payment programme in place could open up other possibilities previously closed off to you.
6. You can minimise the impact on your job, work and status
Some ways of dealing with debt (such as bankruptcy and protected trust deeds) can have negative consequences on your job, career and future prospects. These options can lead to things such as, for example, dismissal from certain occupations (particularly financial services and banking).
You may also be barred from being a company director or standing for public office if you have gone down one of these routes. None of that applies to a DAS, which does not have the ‘social stigma’ that some people associate with bankruptcy or the consequences of other debt solutions. However, your credit rating may still be affected.
7. You get a degree of flexibility
As anyone knows, things can and do change in a person’s life. A DAS contains a degree of flexibility to reflect this fact and you can apply to make a change in your contribution. You may, for example, have fallen ill or had a financial setback such as a short-term drop in income.
If something like this happens, then you can apply for a payment ‘holiday’ for a period of up to 6 months. This period is then simply carried forward to be added on to the end of your DAS.
8. You can settle early
One of the good things about a debt arrangement scheme is that you are free to pay it off early if find yourself in the position of suddenly having more money. You may receive a windfall in the form of an inheritance or money from the sale of a property for example.
If your income increases, you can, of course, increase the payment that you make each month to your debt payment programme (DPP). This will shorten the length of the programme and allow you to become debt-free sooner.
9. You are protected – a DAS is protected by statute
Unlike other debt management programmes, a DAS is a statutory alternative to insolvency and is unique to Scotland. Whereas under a debt management programme (DMP) creditors are not prevented from making further demands or taking further action in the course of the programme.
People in Scotland who have a DAS in place are protected as long as they continue to make the single payment they have agreed to under the arrangement.
Under a debt management programme, you could very well find that creditors will continue to contact you (with all the stress that that entails). They could also decide to add interest and charges and could even apply for a County Court Judgement (CCJ). But there’s no obligation on them to stop or reduce interest and charges.
Even if they do generally agree to stop or reduce charges, it will take some time for this to ‘kick in’ and different creditors will do this later than others.
A DAS protects you in a range of ways preventing creditors from taking further action against you. These include earnings arrestments: anyone who is employed can potentially have money deducted from their wages by a creditor who approaches the employer, having served you with the requisite charge for payment or charge to pay.
There are strict rules and procedures around all of this, but, as long as they are followed correctly, your employer can be forced to deduct money directly from your earnings – money which is then paid directly to your creditors.
Apart from the embarrassment this may cause, there are other factors to consider. Your contract of employment may contain a clause about wages arrestment being subject to a disciplinary procedure; this could well be the case if you are in a financial services position, for example, although many other organisations may also have such clauses in their employment contracts.
This could mean that you will need specialist employment law advice if you find yourself in this position. You may be able to avoid this situation by entering a Debt Arrangement Scheme A DAS also protects you from creditors seeking to make you bankrupt, which could involve assets such as your home being sold to realise your equity or seeking an inhibition against your home.
An inhibition stops you from selling or transferring ownership of your home or taking out any further secured loans on your home. This is to make sure you can’t then use the proceeds from the sale of your home to pay for anything else.
10. Your health and wellbeing are safeguarded
Worry about and uncertainty around money can cause a whole range of health problems, including mental health problems. It can also affect your personal relationships with family and friends and have a negative impact on your performance at work.
The truth is, money worries can affect all aspects of your life. A DAS can help to solve such problems and give you the chance of a brighter future.
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