What is a debt arrangement scheme?
A Debt Arrangement Scheme is a debt solution available to residents of Scotland that allows you to repay your debts by making affordable monthly payments.
The DAS also protects you from any future legal action from your creditors, or any debt collection companies seeking to recover money, in what is known as a Debt Payment Programme (DPP)
A DAS is designed to be an alternative to Sequestration or a Protected Trust Dead for residents of Scotland wanting to avoid insolvency while repaying unaffordable debts, similar to an IVA in England. Additionally, a DAS can also, if approved, freeze interest and charges as well as protect you from legal actions by your creditors.
Is a Debt Arrangement Scheme right for me?
A DAS may be the preferred option for Scottish residents, looking to lower their monthly debt repayments while also gaining some needed breathing room from their creditors. Going with a DAS will also allow you to avoid insolvency.
When should I consider a Debt Arrangement Scheme?
If you are struggling with your monthly repayments, feel overwhelmed by your creditors, and are relying on your overdraft or loans to make your monthly payments each month, then a Debt Arrangement Scheme could be right for you.
The scheme is intended for those who have a stable income, and can make monthly payments, but are currently struggling with their debt repayment costs. The scheme can also protect homeowners who don’t want to sell their property. Through the scheme, each of your debts will be consolidated into one affordable monthly payment based on what you can comfortably afford. This payment is then divided and split between your creditors as part of your DPP. You can apply for a DPP with any amount of debt, all DPP applications will need to be made with a professional money advisor.
What debts does a Debt Arrangement Scheme cover?
A DAScovers a wide range of unsecured debts, including:
- Personal debts
- Council tax arrears
- Utility bill arrears
- Credit card debts
- Store cards
- Payday Loans
Debt Arrangement Scheme Pros and Cons
- A guarantee of legal protection against creditors and interest & charges will be frozen
- Your possessions and property remain safe, regardless of equity value
- Creditors who initially reject your proposal can be forced by an administrator to comply if the arrangement is deemed fair
- Limited access to future credit
- Credit score will be affected
- Will need to make regular payments
Applying for the Debt Arrangement Scheme
- After deciding that a DAS is right for you, a proposal is sent to each creditor you owe money to, and a 21-day objection period is then entered
- If no objections are raised, the Debt Payment Programme is approved. If one of the creditors objects, the DPP can still be approved by an administrator if deemed to be fair.
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Am I eligible for a Debt Arrangement Scheme?
To be approved for a Debt Arrangement Scheme you’ll need to:
- Be a resident of Scotland: The Debt Arrangement Scheme is a debt solution specifically designed for residents of Scotland. If you currently live outside of Scotland, you will not be able to apply. Alternatives for people elsewhere in the UK could be an IVA or Debt Relief Order
- Have one or more outstanding debt: You can apply for a DAS so long as you have debts with at least one creditor, there is no limit to the level of debts you currently have.
- Earn enough each month to pay towards your debt repayments: Having a stable job or steady income each month will allow you to contribute towards your Debt Arrangement Scheme and stay on top of your monthly debt repayments. If you can show your creditors that you are able to consistently pay towards your debts, you’ll have the best chance of being approved for the scheme.
What debts does a Debt Arrangement Scheme not cover?
Though a DAS covers a wider range of debts there are still debs that the scheme doesn’t include, these are:
- Student loans
- Legal debts
- Secured loan payments
- Ongoing mortgage payments
Living with a Debt Arrangement Scheme
As with other long-standing debt repayment plans, a DAS can take many years to fully pay off. There is no fixed length, so it’s important to understand the implications before entering.
Financial: With your monthly debt repayments reduced to a manageable monthly amount, your financial situation should see a vast improvement. Similarly, as you will be protected by law from your creditors, you will gain peace of mind of knowing exactly what you owe each month.
Loans/Mortgage: As with any debt solution, a DAS will have a negative effect on your credit score. As such, it will become difficult to be approved for any loan or mortgage agreements as your reduced payments may signal to lenders that you have previously struggled to repay.
This negative credit score will remain on your file for a minimum of six years.
“I was amazed at how easy it was to talk to a stranger about my debt.“— Kevin, Greater London
Read Kevin’s story…
Can a Debt Arrangement Scheme protect me against bailiffs?
As a DAS grants you legal protection from creditors, the scheme will protect against bailiffs and any further legal action taken against you by your creditors. All future contact will be made through a money adviser who will represent you in all communications throughout your DAS.
What happens if a Debt Arrangement Scheme fails?
Failure to comply with the agreed upon DAS condition could see your DAS revoked. Without the legal protection of the DAS, your creditors would be free to reapply all interest and charges, as well as pursue legal action against you to retrieve what you owe.
Can I pay off my Debt Arrangement Scheme early?
DAS allows for increased payments should your situation improve, and you wish to pay off your DAS quicker. The scheme is also flexible with reductions should you find your current payments too much.
Alternative Debt Solutions
There are a number of debt solutions available and seeking debt advice from an FCA-regulated company like MoneyPlus Advice can help you to make an informed decision.
Debt Management Plan
A Debt Management Plan is an informal agreement between you and your creditors to pay back your debts with one affordable monthly payment, without taking on more debt.
Debt Relief Order (DRO)
A DRO is an alternative to bankruptcy for people with debts of less than £30,000 (£20,000 in Northern Ireland) and less than £75 a month in disposable income.
Protected Trust Deed
A formal debt solution, for residents of Scotland, that’s intended to remove the pressure of unmanageable debts, by combining them into a single monthly payment.
Debt Consolidation Loan
Pay off all of your unsecured debts with one debt consolidation loan and make one monthly payment, rather than multiple payments to creditors.