Find Out If You Qualify For A Debt Arrangement Scheme (DAS)
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DEBT ARRANGEMENT SCHEME (DAS): WHAT YOU NEED TO KNOW
If you are a Scottish resident and are struggling with your finances, then a Debt Arrangement Scheme (DAS) may offer you a potential solution. The Scottish government created the debt arrangement schemes to help people struggling to pay back their debts. One of the primary benefits of a DAS is that you will stop being harassed by your creditors.
With a Debt Arrangement Scheme, you will be required to make one monthly payment to your money advisor. The payment you make is divided up and sent to your creditors. The other good thing about a DAS is you can qualify for it regardless of the amount of debt you have. We have produced the ultimate guide to a DAS answering all your questions.
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What exactly is a Debt Arrangement Scheme?
A Debt Arrangement Scheme (DAS) is a government-run debt management tool for residents of Scotland. It allows you to pay off your debts via a Debt Payment Programme (DPP). Just like a Debt Management Plan (DPP), a DAS enables you to repay your debts in full over a reasonable period of time. All charges, fees and interest on the debts are frozen. Your creditors are prevented from taking any court actions to recover the debts you owe them.
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A Short Background of Debt Arrangement Schemes
Debt Arrangement Schemes were introduced in 2004. The benefits include preventing creditors from taking any legal action against you. It prevents creditors from raising petitions to have consumers declared bankrupt in court. Debt Arrangement Schemes also freeze interests and charges on your unsecured debts.
How Do I Qualify for a Debt Arrangement Scheme?
To qualify for a debt arrangement scheme:
- You must be a Scottish Resident.
- You must have surplus income left over once you have paid your household bills.
- You must owe money to one or more creditors.
- You must able to fully pay your debts in a reasonable period of time.
- You must not be currently going through sequestration.
- You must not be in a trust deed from which you have not been discharged.
- You are a homeowner with a high level of equity and you do not want to sell your home.
- You are employed in a job that would be affected by other debt options, such as sequestration or protected trust deed.
- You have sought the advice and assistance of a DAS-approved money adviser.
Couples may be eligible for a joint programme if they are:
- Living together as a husband and wife.
- Civil partners.
- Are in a relationship with the characteristics of a husband and wife, except they are of the same sex.
- Both applicants accent to the proposal.
Businesses, such as unincorporated bodies, trusts or partnerships can also seek to repay their debts via a debt arrangement scheme. Examples of businesses excluded from a DAS include:
- Businesses not formed under Scots Law.
- Public or limited companies.
- Companies established or carrying out business outside Scotland.
We offer debt solutions to UK residents who are looking to take back control off their finances, we firstly assist you by finding out more about your current situation before recommending to you the most appropriate debt solution for your circumstances.
You must reside in the UK for us to assist you.
Benefits Of A DAS
How Does a Debt Arrangement Scheme Work?
A DAS is very simple to set up compared to a Protected Trust Deed. In addition, it is a flexible debt solution that can help you repay all your debts in a manageable and affordable way. Here are the critical steps to follow when setting up a Debt Arrangement Scheme.
Step 1: Find a Money Adviser
DAS applications can only be made by a licensed money adviser. Be sure to choose a money adviser who is specially trained with a good financial knowledge. We can help find you a money advisor simply get in touch and let us provide you with advice.
Step 2: Working Out What You Can Afford
This is the most important part of setting up a DAS. Your money adviser will do an income and expenditure with you to determine the amount of money can afford to repay each month. If you do not have any disposable income, chances are that your application will not go any further. not to worry we can assist you in finding an alternative plan.
Step 3: Set Up a Debt Payment Programme (DPP)
Depending on the disposable income left over, your money adviser will create a debt payment plan that distributes the surplus amount among your creditors. The adviser will then contact your creditors for approval. Your creditors will be allowed 21 days to respond from the time of the first contact.
If they do not respond within this timeframe, it is assumed they have agreed to the terms of the DPP. In case they respond and reject your DPP, their objection won’t be able to stop it, as long as the DPP is fair and reasonable.
Step 4: Approving the DPP
If the 21 days are over and there is no objection that has been raised on the DPP’s fairness, your money adviser will send the DPP to a Debt Arrangement Scheme administrator for approval. Once it is approved, all interest, fees and charges on your debts will be frozen to help you pay off the debts quicker.
You will also have to pay a small amount of money into an emergency fund to cover unexpected financial demands that could impact you while on your DPP, such as car repairs. This will also help you to get used to living without credit.
Step 5: Start Repaying Your Debts as per the Payment Plan
After approval, the administrator will enter your DPP onto the DAS register. You will then make regular monthly payments which will be distributed to your creditors until the end of the payment plan agreement.
Step 6: The End of Your DPP
Your DPP will come to an end after your last payment is made. Your money adviser and payment distributor will issue you an official sign-off at which point you will become debt free and no longer need to make any further payments to your creditors.
How Much Does a Debt Arrangement Scheme Cost?
Some companies will charge you the cost of setting up a Debt Payment Plan although some DAS providers also offer free services for this. Once your DPP is approved, 10% of the monthly payment may be deducted as fees. This will cover the cost of administering your Debt Payment Plan. The Accountant in Bankruptcy (AiB) will take 2% of the payments and your payment distributor will take 8%. This will total up to 10% . Your creditors will bear this cost, which means that you will not have to pay back more than what you actually owe.
How Long Will a Debt Arrangement Scheme Last?
Unlike most debt solutions, there is no specified time within which a Debt Arrangement Scheme should last. The scheme can last until you have paid off all of your unsecured debts included in the solution. Once your Debt Payment Plan is accepted, your money advisor will give you a tentative end date for your DAS. However, this can change if you decide to take a payment break or vary your agreed monthly payments.
If you are applying for a Debt Arrangement Scheme and you think it will take to long to pay back your debts, you should consider choosing another debt solution. We will be able to provide you with alternative solutions simply get in touch.
How Does DAS A Affect My Credit Rating?
If your Debt Arrangement Scheme is accepted, it will appear on your credit file for the next 6 years. This means you will struggle to be able to obtain further credit during this time period. Your lenders will be able to see you are on a DAS and they are more likely to reject you. Or if they accept you, they may offer very high interests rates or a lower credit limit than what you applied for. After the six years are over, your record of insolvency will be automatically taken off.
What if My Financial Situation Change During DAS?
If your financial situation changes while you are on a Debt Payment Plan, you can request your monthly payments to be changed. Your DAS-money advisor and creditors will consider the impact of the change. For instance, if your income has reduced, they will decide how long they can reduce the payments your making for and then approve it.
If you are on a Debt Payment Plan and your disposable income has reduced by 50%, you can request a payment break (a period when you will not be required to pay your debts). Your financial situation can change due to a number of things, including:
- Divorce or separation.
- Not being able to work due to an illness.
- Paternity or maternity leave.
- Being unemployed or changing jobs.
A payment break can last for up to 6 months and can help you get back on your feet before you start making your repayments again.
Which is better: a Debt Arrangement Scheme or a Trust Deed?
If you are struggling with large unsecured debts, it is imperative to know that there are a number of options available to you. In Scotland, there are three main statutory debt help solutions: sequestration, trust deeds and Debt Arrangement Schemes. Both Trust Deeds and Debt Arrangement Schemes have a number of similarities and differences. However, they are both designed to help you get out of debt in a more manageable manner. Here is a comparison of a DAS and a Trust Deed.
Length of Time
A trust deed usually lasts for 4 to 5 years. A Debt Arrangement Scheme, on the other hand, lasts until your unsecured debts have been cleared. A DAS can last less than 5 years, but it depends on the total amount you owe and how much you can afford to pay back each month. A trust deed usually runs for a shorter period of time than a DAS.
A Debt Arrangement Scheme will remain on your credit file until all the debts are cleared, or for 6 years, whichever is longer. A trust deed will appear on your credit history for 6 years from the date you signed the deed or even longer if it lasts more than 6 years.
Protection of Assets
In both a DAS and a Trust Deed, your assets are protected from the actions of creditors. This is because both debt solutions protect you from the legal action from your unsecured creditors. In both debt solutions, you will be required to disclose your assets. For the trust deed, you will disclose the assets to your creditors while in a DAS you will disclose your assets to your money adviser.
Interest and Charges
If a DAS or a Trust Deed is accepted by your creditors, they are legally required to stop any interest and charges on your debts to allow you to pay them back quickly. However, if both debt solutions fail, it is important to note that your creditors can reapply the interests and charges on your outstanding debts.
What are the Pros and Cons of a Debt Arrangement Scheme?
Pros of a Debt Arrangement Scheme
- The scheme is flexible to accommodate changes in your financial situation in the future.
- Your home is protected as long as you make your full mortgage payments.
- Interest and charges on your debts are frozen provided you stick to the agreement.
- Harassment’s from your creditors is stopped and you will have the support of your money adviser
- Your creditors cannot declare you bankrupt.
- Your creditors cannot take further legal actions against you.
Cons of a Debt Arrangement Scheme
- Longer payment schedules as your debts have to be repaid in full.
- Your credit rating is negatively affected by the scheme.
- Your creditors may reapply interest on your debt if you fail to complete the scheme.
- You cannot obtain further credit while in a DAS without prior approval.
These are some of the most important details you should know about Debt Arrangement Schemes. If you are looking for a trustworthy money advisor to guide you via a DAS and other alternative debt solutions, Contact Us.
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