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Is a Debt Arrangement Scheme suitable for me?

When considering the Debt Arrangement Scheme (DAS), the first thing to think about is where you live now. DAS is only available for people who are resident in Scotland. If you are currently a resident in England or Wales, then you are not eligible to take advantage of DAS.

If you are currently living in Scotland but when you originally borrowed the money that you owe you were living elsewhere, this does not matter. You now fall under the jurisdiction of Scottish law and you will be able to consider a Debt Arrangement Scheme to resolve your debt problem.

I addition to being resident in Scotland, you can only apply for a debt arrangement scheme if you meet the following criteria:

– You have more than one debt

– You have disposable income (some money left over once you’ve paid your essential expenses) which can be used to pay your creditors

– You have not already been declared bankrupt or signed a Trust Deed.

Are you insolvent?

You can only undertake a DAS if you are insolvent. You will have to present your income and expenditure budget to a DAS approved Money Advisor who will look very carefully to make sure that you are not overspending in any areas and that your expenditures are reasonable.

You will normally have to back up your monthly expenditures with paperwork (such as a mortgage or rent statements and copies of recent bank statements). If the Money Advisor believes that you can continue to make your normal monthly debt repayments by spending less on luxuries, then you will not be eligible for DAS.

Are your debts unsecured?

You can only include unsecured debts in a Debt Arrangement Scheme. These include debts like credit cards, personal loans, catalogues, pay day loans and bank overdrafts.

BMD Tip: You can not include a student loans company debt or certain court fines within a Debt Arrangement Scheme.

You cannot include secured debts such as a mortgage or secured loan in a DAS. In addition, debts such as child support arrears, council tax fines and benefits overpayments cannot be included. As such if the only debt you have is secured, then DAS is probably not for you.

Can you repay your debt in a sensible time?

Although further interest and charges will be frozen, starting a Debt Arrangement Scheme does not mean that your creditors have to write off any of the debt you currently owe them. This means that you will still have to repay everything that you owe.

For this reason you must understand that the time required to pay all of your debts may be significantly extended if you start a DAS.

You can get a good idea about how long it will take to repay your debt using a DAS payment plan by taking the total of the unsecured debt you owe and dividing it by the amount you can afford to pay your creditors each month. If the amount you can afford to pay is minimal, the DAS could well last for many years longer than your original payment agreements.

If you are worried about the length of time it will take to repay your debt using a DAS, it may be sensible to consider the alternative options of a Protected Trust Deed or Sequestration.

Protection for homeowners

If you are a home owner and you start a DAS payment plan you will not be obliged to release any equity you may have in your home. As such this is an advantage of the DAS over other Scottish debt solutions such as a Trust Deed and Sequestration.

The reason you are not obliged to release equity is because with a DAS your creditors are not agreeing to write any of your debt off. You will still have to repay everything that you owe based on reduced payments over a longer repayment period.

In addition to not having to release equity, you also get protection from further legal action being taken against you. As such there is no risk that any of your creditors can apply for a charging order against your property.

Discretionary Conditions

As a condition of your DAS debt-payment programme you could be required to sell any assets you have which could be sold to repay your creditors. However, because you are still obliged to repay 100% of your debt through the DAS scheme, this condition would only be introduced on rare occasions.

If the condition is introduced, some household assets are exempt. These include items necessary for day to day living such as clothes, furniture, household linens, floor covering, cooking and cleaning materials, educational items and children’s toys. Also tools of trade and vehicles necessary for your employment worth up to £1,000.

Other Debt Solutions might be suitable for you

A DAS is not the only debt solution which might be suitable to resolve your debt problem. Before making your final decision to apply for a DAS you should also consider the other available debt solution options.

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