If you find yourself being pursued by creditors and under threat of legal action to recover your debts, security can be found by establishing a Debt Arrangement Scheme.
The DAS is a statutory debt management scheme which allows you to make your repayments over a period of time which suits you and gives you the breathing space to set yourself on a level financial footing once more. Established by the Scottish Government it is available only to residents of Scotland, and allows you to freeze interest on the money you owe while protecting your assets.
The scheme requires you to arrange a Debt Payment Programme, through which your home and car are protecting. Provided you maintain your repayments all penalties, fees and charges will be waived, and the interest on your debt frozen. When you complete the DPP your debts are cleared and creditors cannot pursue you for any outstanding amount not included in the payment plan or which was written off as part of the DAS.
Through this process, you can relieve yourself of much of the stress and strain of facing up to personal debts which can otherwise seem overwhelming. You are able to protect yourself from the threat of legal action and focus solely on settling your debts and enjoying a life free from your financial worries.
With the support of our expert team you will no longer have to deal with creditors contacting you, while our clear and achievable plan will outline an effective route for you to become debt free. The DAS scheme, however, is only available in Scotland. If you are in England or Wales you will have to seek an alternative solution, such as an IVA. Alternatives in Scotland include Trust Deeds and Bankruptcy.
In this guide we will look at:
- What is a Debt Arrangement Scheme?
- How do I use a Debt Arrangement Scheme to repay my debts?
- What happens next?
- How do I decide if using the Debt Arrangement Scheme is best for me?
- What will happen if I encounter difficulties in sticking to the Debt Payment Plan?
- Our role in your Debt Payment Plan
What is a Debt Arrangement Scheme?
A DAS is applied in the main to unsecured debts, which can include loans and overdrafts from banks and building societies and credit cards, store cards and charge cards. Payment arrears – such as council tax or utility bills – or debts from home or online shopping can also be tackled using the scheme,
Secured debts – such as mortgage debts and arrears – are unlikely to be included in the scheme. This is because your property is already held as security against the loan. Despite this, whatever your monthly contribution towards your mortgage is will be taken into account when your DPP is being calculated and propose.
It is possible for mortgage arrears to be included in the scheme, but only if an agreement is reached. If you have mortgage arrears it is important that you contact the secured lender. It is only with their agreement that any mortgage payments can be calculated when your monthly DPP payment plan is being calculated.
How do I use a Debt Arrangement Scheme to repay my debts?
To set up a DAS, the individual should contact a DAS-approved Money Adviser. This is because you are not allowed to establish a DAS on your own. The process must be undertaken by an approved adviser, who is able to negotiate with your creditors, and build a proposal on your behalf which is then submitted to form the DPP.
Our highly-trained team of advisers will use their expertise get you the best deal possible. With our experience in negotiating with creditors we are able to make offers which have a good chance of success, and have built a reputation for gaining creditor approval for our proposals.
In order to build a proposal which can free you from you financial worries one of our advisers will have an in-depth discussion about your circumstances, assessing your income and expenditure and your total debt.
Often people in debt have incomplete records, with bank statements missing and correspondence from creditors unopened or lost, but our team will work with you to build an accurate picture of your finances. This conversation will always take place in a confidential and considerate environment, and you can be sure that all the information gathered will help lead you to the conclusion of your debt problems.
By understanding your personal situation as well as the details of your debt – such as your earnings, your existing commitments, your assets and your family situation – we are able to build a reasonable proposal calculated on your ‘disposable’ income, with a single manageable monthly payment to your creditors.
Our adviser will clearly explain the process to you before you decide if it is an appropriate solution, including the costs incurred and when and how payments will be made. If, once you are fully informed of the process, you decide that a DAS is the best option for you, we will then prepare your proposal, and submit an application for a DPP. It is at this point we will contact your creditors for their approval for the plan.
What happens next?
Once your creditors receive the application for a DPP they have a period of 21 days in which to either approve or reject the plan. If they fail to respond during that time period they are deemed to have accepted the proposal and the plan can be implemented.
If objections are received it does not necessarily mean the plan cannot be established. In this case, the DPP would be examined by the DAS Administrator (the Accountant in Bankruptcy) and if they rule that the application is a ‘fair and reasonable’ one your creditors are legally required to accept it.
Once we have gained approval for the scheme it can begin, and regular monthly payments are set out. These affordable contributions will be made each month to the Payments Distributor, who then pays your creditors according to the terms of the plan. A management fee is deducted by the Payments Distributor, but the costs of this service are met by the creditors. You do not have to worry about making separate payments to whoever is managing your plan.
Depending on the scale of your debts and your personal circumstances, the DPP can take up to 10 years to complete. This is because we ensure your monthly repayments are affordable and reasonable. We will not establish a plan which you cannot confidently expect to stick to.
Having completed the repayment of your debt through the DAS, and having abided by the terms of the DPP, your debt will have been met I full. Once the final instalment on the schedule of repayments is paid your debt is cleared in full. All interest, charges and penalties are waived. Once the DPP is concluded creditors are unable to pursue for any previous amounts.
How do I decide if using the Debt Arrangement Scheme is best for me?
Not everyone can successfully conclude a DPP. To so you must be resident in Scotland for at least 6 months, and cannot already be pursuing an alternative debt solution. If you are bankrupt or subject to a bankruptcy order, of if you are already in a Protected Trust Deed, you will not be able to apply for a DPP.
Howe long the DPP takes depends entirely on your circumstances. There is no fixed period, so the length of time your plan will take is subject to you making the payments as arranged. Once you have made your final repayment the DPP is concluded.
You must also be aware of the last effect a DPP will have on your credit rating, and you may be unable to obtain credit in the future.
There are, however, also many benefits from choosing a DPP. Beginning your plan will ensure that your creditors are prevented from taking legal action against you to recover your debts. You won’t even be contacted by your creditors anymore, since you Money Adviser will deal with your creditors throughout the whole process, and correspond with them on your behalf. You can also be confident that the plan will be a reasonable, since our advisers will have worked closely with you to build a schedule of repayments which are affordable. The DPP is arranged to take into account your existing payments, such as your mortgage, so your home should not be affected.
It is also possible for sole traders to apply for certain business debts to be included in the plan, so if you are in this position we will take any such debts into consideration.
What will happen if I encounter difficulties in sticking to the Debt Payment Plan?
Many people find that their circumstances change once they have established the DPP. In such circumstances, applications can be made to the DAS Administrator to find a fair solution. If you find that your circumstances are different to how your position was at the outset of the DPP you should contact the Money Adviser, who may decide with you to apply for a variation of payments or even a payment holiday. Depending on your situation you may be allowed to reduce the level of your repayments or even suspend them for as much as six months.
Such a situation arising does not need become a problem for the success of the DPP. Provided that you secure the support of the DAS Administrator for any suspensions or alterations you will still be protected from legal action by your creditors.
If your circumstances improve it may also be possible for you to make increased payments to the plan in order to shorten its duration. However, if you are in a position to make such payments regularly you may find it better to make an application to change the details of the DPP in order to conclude your repayments more quickly.
Our role in your Debt Payment Plan
We take our responsibility to your DPP seriously. Our team of Money Advisers are DAS Approved, meaning they have the approval of the Scottish Government to advise those with debt problems and to establish plans on their behalf. We are committed to working closely with you at all times to keep you fully informed of the benefits you can see by starting a DPP, as well as any problems which may arise through your plan. We will provide you with the information to make the best possible choice for your situation, as well as using all of our experience to help you along the road to becoming debt free.