As the country continues to cope, many will need to deal with the impact of debt.
The Debt Arrangement Scheme (DAS) is a formal debt solution in Scotland that has seen significant growth in the last year.
Such has the growth in the use of the Debt Arrangement Scheme been in Scotland, that the number of people using the solution grew 18% in 2020 against 2019, according to official Scottish government statistics.
Under existing affordability rules, the solution can only be put in place if an individual has the ability to be able to make regular repayments from their income.
However, from 11 January 2021, it is now possible for those struggling with unmanageable debt as a result of a loss of income due to the pandemic, to make minimum or token payments through DAS with a view to increasing them when their income returns to a normal level.
What is a Low and Grow DAS?
Low and Grow Debt Payment Plans, or Low and Grow DAS as they are also referred to, are the latest tool being rolled out to help people with unaffordable debts in Scotland.
For many Scottish residents, this will provide vital breathing space and a welcome opportunity to take control of household finances. The first few months of the year are typically the time of year when more people need help with their unaffordable debts.
UK government figures show that after the first lockdown, over 700,000 Scots had been furloughed under the UK job retention scheme, with many households struggling with debt, the newly created Low and Grow debt payment plan should give welcome relief to those who are in a position to repay their debt over a longer period of time but require a short term solution in the intermediate period before their regular income returns to normal.
When a person repays their debts through DAS, interest and contractual charges are frozen. DAS lifts wage arrestments; stops court action including Sequestration (bankruptcy in Scotland) and requires one monthly payment that is distributed to all creditors on their behalf.
You can find out more the advantages and disadvantages of the Debt Arrangement Scheme and alternative formal solutions such as Trust Deeds by calling Trust Deed Scotland on 0141 221 0999.
Jamie Hepburn, Minister for Business, Fair Work and Skills said: “I am acutely aware of the impact that the pandemic and necessary restrictions are having on household finances. In this uncertain time, I would encourage anyone experiencing problems with debt to seek advice as soon as they can.
“DAS is an enormously valuable tool to help manage problem debt and the Scottish Government has worked closely with the advice sector and other stakeholders to introduce greater flexibility in the operation of the scheme to assist those impacted by the pandemic.”
Trust Deed Scotland® said: “Getting early, tailored debt advice remains crucial as the country continues to cope with the pandemic.
Every day we speak to people who are feeling overwhelmed by the challenges of lockdown, homeschooling, poor mental health, caring for elderly relatives, reduced income and many are feeling overwhelmed with their debt. Many of those individuals have had a sudden change in their circumstances and are prevented from repaying their debts due to a short term inability to make repayments.
That short term problem can sometimes lead to a situation where the person can never catch up and a debt solution is required.
We welcome the newly created Low and Grow debt payment plan and urge people struggling with problem debt to seek debt help now.”
Low and Grow Debt Payment Plan vs. Minimal Asset Process
Minimal Asset Process (MAP) is a route into Sequestration (bankruptcy) aimed at individuals who have no, or little assets and who also have little, or no income.
DAS is not insolvency, it is the only statutory debt management plan in the UK.
In order to find out which option suits an individual better, it is essential to seek advice before making a decision. Both solutions, in addition to Trust Deeds, are effective ways of formally dealing with unaffordable debts.
While it’s true that many people currently furloughed, or claiming Universal Credit may loosely qualify for both, a clear understanding of your personal circumstances, assets, future ability to repay debts, and/or desire to rebuild a credit rating need to be correctly assessed.
Bankruptcy has always carried the greatest stigma and many people that we’ve spoken to over the years have struggled on for years to avoid being made bankrupt but the reality is that in the right situation, the Minimal Asset Process route and Full Administration Sequestration are effective tools that have helped thousands of people rebuild their lives through the years.
Alternatives to Low and Grow DAS or MAP
If you are struggling to repay your debt and feel that MAP is too severe, or the Low and Grow DAS doesn’t seem like an arrangement that you want to consider, there are other solutions that you can explore, including a Statutory Moratorium, or payment breaks (Tailored Support).
Statutory Moratorium Scotland
If you are worried that you may be at risk of Sheriff Officers taking action against you, a Statutory Moratorium (Scotland) is a legal instrument that you can use to protect yourself.
Statutory Moratoriums also protect you from creditors making an application for you to be Sequestrated.
The Statutory Moratorium gives you 6 months protection from a Sheriff Officer taking action against you, such as arresting your bank account or freezing your income.
If you are worried a Sheriff Officer may freeze your bank accounts, or arrest your wages, then a Statutory Moratorium may be suitable for you.
It can also stop possessions like cars, or any other valued asset item, being attached.
The process is designed to allow breathing space for anyone struggling with their debts, so they can consider their options, regardless of whether those options are the Debt Arrangement Scheme, a Trust Deed or Bankruptcy (Sequestration).
Essentially, a Statutory Moratorium can be used to buy you time, until the pandemic is over so that you can review your options at a later date when you have more information on your future ability to pay.
Payment Breaks and Tailored Support
You may be able to apply for payment breaks directly with your lenders, up until 31 March 2021. This will generally give you three months payment breaks per application, however, all payment breaks are scheduled to end by 31 July 2021 and if you’ve already had two payment breaks, you cannot apply for another payment break – you will then revert into what becomes known as Tailored Support.
Payment breaks and Tailored Support apply to a range of products from credit cards and loans to mortgages and car finances.
In theory, applying for a payment break under the current rules would have no impact on your credit rating, however, getting a payment holiday under tailored support will impact your credit rating.
As Tailored Support is more ambiguous in its definition, it’s down to your lender to advise on what they can offer you including a (further) payment deferral a (further) period of reduced payments, waiving or reducing interest, agreeing on a repayment plan and/or refinancing your credit agreement.
Advice on your options
To find out more about managing your money and getting free advice, visit Money Advice Service, an independent service set up to help people manage their money.
Trust Deed Scotland® can give you advice on Low and Grow DAS but also advice on applying for a Statutory Moratorium and our experienced team, offer debt advice that is…
- Non-Judgemental – Our friendly, helpful team want to help find a solution that suits your needs.
- Confidential – We do not share your details with any other companies. Your data is safe and secure.
- Experienced – 25,000 people helped and over 5,000 five-star reviews on Trustpilot.
- Tailored – Pros and cons of all formal solutions explained.
Apply for a Low and Grow DAS
You can find out more about applying for a low and grow DAS by using our online form, or by calling us on 0141 221 0999.
Our experienced debt advisors provide tailored debt advice outlining the risks and benefits of the Debt Arrangement Scheme and other formal Scottish debt solutions including Protected Trust Deeds and Sequestration.