What happens next in the Debt Arrangement Scheme application process?
If the individual chooses DAS, the individual commits to a debt payment programme (DPP) based on all their creditors receiving regular payments of their share of whatever the individual can reasonably afford each month.
A DPP can last for any reasonable length of time (normally up to 10 years), depending on the amount of debt and how much the individual can pay.
A DPP under DAS is proposed to creditors in the following way:
- Proposals are sent to all the creditors and they have 21 days to respond if they wish to object to them.
- If no creditors object, then the DPP is approved automatically.
- If creditor(s) object and they are owed up to 10% of the total debt, then the DPP application will be automatically approved.
- If one or more creditors object and they are owed more than 10% of the total debt, then the DPP can still be approved if it is judged to be “fair and reasonable” by the DAS Administrator (Accountant in Bankruptcy).
- It is possible that the circumstances may change whilst the individual is repaying the debts under DAS, in which case the DPP may be varied to accommodate this change without penalty.
- The continuing money adviser will help the individual produce an alternative debt payment programme based on the current situation and send this for approval.
- The same 10% rule (described above) applies for approval of variations to already approved DPPs
- So long as the amended proposal is fair, the creditors will not be able to stop the debt payment programme being approved.
- If the DPP is refused, the individual has the right to appeal against the decision. However, the individual may need to look at other options, such as a Protected Trust Deed or Sequestration.
Only qualified money advisers can advise on and manage a DPP under DAS.
A money adviser can be employed in the free advice sector, such as with the local Citizens Advice Bureau or local authority money advice team or the Money Adviser can be an insolvency practitioner (or a suitably qualified member of his/her staff).
Once the DPP is approved, the individual only has one affordable payment to make, therefore, their monthly outgoings should be drastically reduced and the pressure from creditors should stop.
How much does a DAS cost?
There are no fees payable by an individual entering into the DAS. This is the same for all individuals whether they use a private sector firm (e.g. Harper McDermott Ltd) or a public
sector organisation (e.g. CAB or local authority Money Adviser).
The costs of administering the scheme are borne by the creditors i.e. from every £ received into the scheme, 22p is used to pay for the costs; this 22p is paid to the DAS Administrator (2p) and the Money Adviser (20p).
The remaining amounts are distributed amongst all creditors on a pro rata basis and a successfully completed DPP deems all debts to be repaid in full.
Debt Arrangement Scheme Case Studies
Debt Arrangement Scheme Scenario 1
Married Couple, with 2 young children. Mr is in full time employment and Mrs is unemployed.
Mr has credit card debts totalling £7k, Mrs has debts of £4k and there is £5k of joint council
tax arrears (i.e. total household debts of £16k)
They had been paying minimum payments on their debts, totalling around £300 per month, which was just affordable but due to high interest rates the outstanding balances were
reducing very slowly.
Unfortunately, Mr’s wages were then arrested for non-payment of council tax. As a result of this, they could afford only £150 per month for all their other debts, and they fell into arrears.
Mr & Mrs Y set up a joint DAS.
As the earnings arrestment is lifted upon approval, they can afford to pay £300pm. All further interest and charges are frozen and their debts will be repaid in full in around 4.5 years.
Debt Arrangement Scheme Scenario 2
Single man in full-time employment. Owns home worth £140k, with outstanding mortgage £80k.
Owns car worth around £7k. Did not wish to lose car or sell his home as has elderly parents living nearby, who require help getting around.
Had unsecured debts totalling £25,000 due to previous business failure. He could afford to pay £350 pm to his unsecured debts and attempted to set up a payment arrangement with
his creditors on this basis through a Debt Management Company.
Unfortunately, one former business supplier is owed £8k and is not willing to agree to any payment proposals via the informal DMP, insisting that the individual must pay the full debt or face legal action.
The creditor is aware of the equity in the house and the debtor fears that this creditor may eventually seek to have him made bankrupt and force a sale of his home.
He has tried to re-mortgage to release funds but was rejected.
Application for a DPP under DAS is made, paying £350pm to his creditors. This means his debts will be fully repaid within 6yrs and his home and car will remain protected.
The difficult creditor objected to the proposals, but they were deemed “fair and reasonable” by the DAS Administrator.
This means that the creditor was forced to accept the arrangement and is no longer able to take any enforcement action as long as the individual successfully completes his DPP.
Also see Scottish Trust Deed: What happens next.
Debt Arrangement Scheme Advice
You can get debt advice today by calling Trust Deed Scotland® on 0141 221 0999 or by completing our Trust Deed Wizard® form.
Our experienced advisors give friendly, confidential and non-judgemental debt advice that covers the advantages and disadvantages of Scottish Trust Deeds and all other formal debt solutions open to Scottish residents.