The Debt Arrangement Scheme lets you apply for a Debt Payment Programme (DPP) which helps you repay your debts in full by making affordable monthly payments.
Interest and charges are frozen from the date of your application being made.
The Debt Arrangement Scheme is only available to people living in Scotland, and there is no equivalent solution for the rest of the UK – however, a shorter term solution is called the ‘Debt Respite Scheme (Breathing Space) ‘ and was introduced in May 2021. This is more similar to a Statutory Moratorium in Scotland.
The Debt Respite Scheme offers people in the rest of the UK a period of 60 days respite from their creditors.
The Debt Arrangement Scheme was first introduced in 2004 to help Scottish residents stay in control of escalating debt without having to follow insolvency procedures.
Who is eligible for a DAS?
To be eligible for a DAS, you would typically meet the following basic criteria:
- Have one or more debts
- Not be subject to sequestration or any other insolvency procedure
- Have a reasonable amount of surplus income after paying priority bills and household expenses
- Be resident in Scotland
There is no set minimum level of debt you need to have in order to be eligible for the DAS, however, this solution is designed for people who are unable to manage their current debt repayments.
All unsecured debts can be covered by a DAS, for example:
Credit and store cards, personal loans, overdrafts and catalogue debts. You can also include mortgage, secured loan and rent arrears (but not ongoing payments).
A few debts cannot be included in a DAS Scotland including fines imposed by any court and any liability due to fraud.
In order to work out whether a DAS is worth applying for, we would always recommend that you speak to an experienced debt advisor and work out the pros and cons, after establishing what your situation looks like based on your affordability, lifestyle and needs.
What is a DPP?
The term DPP stands for Debt Payment Programme – this is the repayment plan agreed between you and your creditors under the terms of the Debt Arrangement Scheme.
Your Debt Payment Programme is arranged by a qualified money advisor, who will help you to propose an acceptable repayment plan to your creditors, set at an affordable level, based on your circumstances.
Although at the time of your application, interest and charges on your debts are frozen under DAS – you will be required to pay back what you owe in full.
What are the benefits of a DAS?
- Only pay what you can afford
- Freezes interest and charges
- Protects your home and car
- Reduces creditor contact
- Monthly payments can be adjusted if your circumstances change
- DAS can stop earnings arrestments
- You can take payment breaks from a DAS if required
- Joint DAS applications can be made by couples/spouses who live together
- DAS does not involve court proceedings
- If creditors do not accept the proposal but are owed up to 10% of the total debt, then the DPP will be automatically approved
- Creditors that do not accept the proposals and are owed more than 10% of the total debt can be forced to comply with the arrangement if it is judged to be “fair and reasonable” by the DAS Administrator
- The payment made does not have to offer the full disposable income, a reduced amount can be offered to allow the individual more affordability for their general living expenses
What are the risks of a DAS?
- You must repay the full amount that you owe, no debt is written off
- If you do not keep up with your DPP payments, your DAS can be revoked
- DAS will have a negative effect on your credit rating
- Once in a DPP, your details will appear on the public DAS register for the plan’s duration
- You will not usually be able to access further credit whilst in a DPP
- A DPP may be rejected by creditors and deemed not ‘fair and reasonable’ by the DAS Administrator
What are the alternative solutions to a DAS?
A DAS is designed to help you pay back your debt at regular, manageable intervals – without the threat of legal action hanging over you, they can also be used by individuals and businesses who are struggling with unaffordable debts.
However, that doesn’t mean that the Debt Arrangement Scheme is right for you.
On some occasions, a Scottish Trust Deed may prove to be a more fitting solution for you, depending on your circumstances.
Trust Deeds may allow you to write off some of your unaffordable debt and may also allow you to become debt free in a quicker timescale. However, your assets such as your home require more scrutiny in order to establish your eligibility to potentially qualify for a Scottish Trust Deed.
Full Administration Sequestration or Minimal Asset Process Sequestration are two other formal solutions to debt, while you may also consider informal solutions such as equity release, or a debt consolidation loan.
In any case, our advice is always to talk about your situation with an experienced debt advisor, who can not only explain what is a DAS, its advantages and disadvantages, but also give you tailored debt advice on all available alternative solutions to a DAS.
Who can set up my DPP?
Trust Deed Scotland® are experienced debt advisers and provide tailored debt advice on all available debt solutions in Scotland.
We make sure that our clients get personalised debt advice based on their affordability, lifestyle and needs.
If you are struggling with your monthly debt repayments but feel that you could repay what you owe in full, given sufficient time to do so, then the Debt Arrangement Scheme may be a good option for you.