Before you make a decision about whether or not to start a Debt Arrangement Scheme (DAS) you may want to consider some of the advantages and disadvantages of the solution. Some of these are highlighted below.
As you go through these you should remember to consider them in the context of your own situation as they may not all be relevant to you.
More often than not an advantage or disadvantage which is important to one person may actually be unimportant or irrelevant for another. As such this type of debt solution will be simply more or less suitable for you given the context of your personal financial situation.
What are the main Advantages of a DAS?
1. Reduced Payments
Under a Debt Arrangement Scheme (DAS), you make a single regular payment based on what you can afford to an approved payments distributor who then pays your creditors on your behalf.
2. Interest and charges frozen
On the date your formal DAS application is made your creditors are forced by law to freeze any further interest, fees or charges on your debt.
3. Protection from legal action
Once you have intimated your intention to use the DAS scheme and/or have an application waiting for approval, your creditors are prevented from taking further legal action against you to collect their debts. This protection continues when the Agreement is in place as long as you maintain your agreed payment.
BMD Tip: In Scotland, there are a number of ways that people can be made to pay by the courts. The most common forms of enforcement (known as diligence) are: arrestment, earnings arrestment and attachment. Once a DPP is agreed, all such actions must cease to be enforced (such as wages arrestment).
In addition, creditors cannot petition for your bankruptcy and your home is protected against creditors applying for charging orders.
4. No need to release home equity
Unlike the other formal debt solutions including Protected Trust Deeds and Sequestration, you will not be forced to release equity from your property if you undertake a debt arrangement scheme.
Your property will also be protected from further legal action by your creditors such as their application for a charging order.
A DAS is flexible and the payments that you make can be varied should your circumstances change. It is also possible to leave certain debts out of the payment plan. However, this is not advisable.
6. Creditors paid in full
As creditors do not agree to write off any debt in a DAS, it means that they will still be paid everything that they are owed although it may take a far longer period of time to achieve this.
What are the main Disadvantages of a DAS?
1. No debt written off
You will have to repay 100% of your debt. Creditors will not normally agree to write off any debt.
2. Significant increase in repayment period
Because you are paying reduced amounts each month your debt repayment period will be significantly increased. As such the time it takes to repay all of your debt and become debt free may take many years.
3. Credit rating effected
The Debt Arrangement Scheme will be recorded on your credit file. This means that you will not be able to take further unsecured borrowing until your debts are repaid in full.
Should you require additional credit to meet an essential requirement during the DPP you must speak to your money adviser and obtain a form 5(a) or other written confirmation that you are subject to a DPP. You should present this confirmation to the potential lender so that they are fully aware of your circumstances before they grant further credit.
However, even by following this process there is no guarantee that you will be able to obtain further credit while you are in a DAS DPP.
4. Public Agreement
If you start a DAS, your name and home address will be entered into the DAS register. This is a public document available via the internet. As such, anyone who wants to find out whether you have a DAS running will be able to do so very easily by searching the register. To view the register see the “Related Links” box above.
5. Risk of DAS failure
If you do not make your agreed payments you risk your DAS DPP being revoked and you will no longer have the protection of the DAS regulations.
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