The Debt Arrangement Scheme in Scotland
Coronavirus - more protection from action by creditors
You can apply for a moratorium which prevents your creditors from taking enforcement action against you. This is to give you time to get advice from a money adviser. The moratorium now lasts for 6 months instead of 6 weeks.
The low and grow short term Debt Arrangement Scheme
If you are experiencing short-term financial challenges, but don’t need a full Debt Arrangement Scheme (DAS) because your financial difficulty may only be temporary there is a new scheme that might help - the low and grow scheme.
The low and grow scheme offers the same protections from creditors and interest that the full DAS provides.
You should get advice from an experienced money adviser.
DAS and missed payments
From 30 August 2021, the Accountant in Bankruptcy (AiB) has started to revoke DAS debt payment programmes if there have been a significant number of missed payments.
If you're in this position, discuss your options with your money adviser. They might be able to:
- arrange a payment break
- apply to vary the DAS.
In some cases, the DAS might not be the best option any more.
What is the Debt Arrangement Scheme in Scotland
The Debt Arrangement Scheme (DAS) is a scheme set up by the Scottish Government. It helps you pay back your debts in a manageable way without the threat of court action from the people you owe money to (creditors).
Under DAS you can make 1 regular payment into a debt payment programme (DPP). This payment is then divided up and sent to your creditors.
You can apply for a DPP with any amount of debt.
You can also apply for a DPP with your spouse, civil partner or cohabiting partner if you are both liable for at least 1 debt.
DAS is just one option for dealing with your debts. You'll need to get advice from a money adviser if you're thinking about setting up a DPP.
If you decide to go ahead with a DPP, a money adviser needs to make the application for you.
Check if you can speak to a money adviser at your local Citizens Advice Bureau. Or check where you can find free debt advice and a money adviser on the MoneyHelper website.
When the Debt Arrangement Scheme might be an option for you
The Debt Arrangement Scheme (DAS) might be an option for you if:
- you have enough money to make regular payments - for example, you have a stable job and you have some money left every month after paying for your bills and for essentials
- you don't want to have to sell your home - you are a homeowner with a high level of equity and you don’t want to have to sell your home. The equity is the amount of money that you would get after selling your home and paying off the mortgage. In some other debt options, such as a protected trust deed or bankruptcy, you might have to sell your home to release the equity
- your job might be affected by other debt options - you are employed in certain jobs which would be affected by other debt options, such as a protected trust deed or bankruptcy. For example if you work in the financial sector, you're likely to be dismissed if you become bankrupt. Becoming bankrupt or setting up a protected trust deed also prevents you from standing for public office or acting as a company director.
Advantages of the Debt Arrangement Scheme
The advantages of the Debt Arrangement Scheme (DAS) are:
- you won't have to sell your belongings or property such as your home or your car (also called assets). But you can decide to sell your home if you want to - this might mean you could pay off your debts more quickly than by making regular monthly payments
- no more enforcement action – you can apply to the Accountant in Bankruptcy to stop your creditors taking steps to recover the money you owe them, for example they cannot arrest your bank account. This is called a 'moratorium' and it lasts for 6 months (it has been temporarily extended to 6 months because of coronavirus). You can also apply for a moratorium if you're thinking of applying for bankruptcy or setting up a trust deed. You can only set up 1 moratorium in any 12 month period
- interest and debt charges are suspended during the DPP and then cancelled when it's complete. This means that you will have cleared your debts by the end of your DPP
- employment – if you set up a DPP, this won't prevent you from working in certain jobs or taking up public office. Some other debt options, such as trust deeds or bankruptcy do restrict the kind of work you can do.
Disadvantages of the Debt Arrangement Scheme
The disadvantages of the Debt Arrangement Scheme (DAS) are:
- paying regular contributions – you might have to pay contributions for a long time to repay your entire debt. Some other debt options such as trust deeds or bankruptcy lead to people being discharged from their debts sooner, although they also have other implications
- your credit rating will be affected for as long as you're in the debt payment programme (DPP). This can make it harder to get credit like a mortgage or a loan in the future
- you can borrow only a limited amount of money during your DPP under DAS. In practice, it might be hard to borrow any money during your DPP
- your home might be at risk – if you have mortgage or rent arrears and you set up a DPP, your lender or landlord can still take steps to recover possession of your home. But it's likely that you will be able to negotiate with your landlord to stop this happening as you can show that you are taking steps to repay the arrears by setting up a DPP.
Other things to consider about the Debt Arrangement Scheme
If you're thinking about setting up a debt payment programme (DPP) under DAS, you should also think about:
- the length of time you will have to pay contributions
- the costs of setting up a DPP.
How long will I have to pay contributions
One of the main reasons for setting up a debt payment programme (DPP) under DAS is that you have enough money to pay off your debts in a reasonable time.
There is no definition of what a reasonable time is. The Accountant in Bankruptcy will decide whether the proposed length of time for payments is reasonable when considering your application for a DPP. As a general rule, more than 10 years might be unlikely to be reasonable unless all your creditors are happy with this.
If your circumstances change during your DPP, you can apply to change the amount of contribution that you're making.
Also if you have a temporary drop in income, for example because you have lost your job or you're ill, you can apply for a payment break for up to 6 months. The period of time that you are unable to make payments for is added on to the end of your DPP.
You can also apply for a 1 month crisis payment break if you have an emergency that means you can't make a payment. You can have up to 2 crisis payment breaks in a 12 month period.
How much does the Debt Arrangement Scheme cost
It's free for an individual to set up a debt payment programme (DPP) under DAS. Money advisers are no longer allowed to charge you a fee for helping you to apply for a DPP under DAS.
You don't have to pay an administration fee for the running of the DPP. Your creditors do have to pay this fee though.
A debt payment programme (DPP) under DAS is not the only option to help you sort out your problems with debt. Other options include:
- bankruptcy (called sequestration in Scotland) – this might suit you if your financial situation has become intolerable because you can’t pay your debts as they fall due. You can apply for standard bankruptcy if you have debts of £3,000 or more. You can apply for 'Minimal Assets Process' (MAP) bankruptcy if you have debts of £1,500 or more and you have no disposable income or belongings or property that can be sold to raise money. Find out more about bankruptcy
- a protected trust deed – this is similar to bankruptcy in that your assets and property are transferred to a trustee who will manage your affairs for the benefit of your creditors. You will have to pay contributions towards your debts for 4 years. It's only likely to be an option for you if you have enough money to make a regular contribution towards your debts or you have belongings that can be sold. You must have debts of £5,000 or more. Having a protected trust deed will not prevent you working in as many types of jobs as bankruptcy. Find out more about trust deeds
- voluntary agreement direct with your creditors – this is where you set up an informal repayment schedule with your creditors. It means that you're in control of your finances but it does also mean that you have to negotiate with all your creditors and if you aren’t able to keep to your repayment plan there is nothing to stop them taking action to recover the money you owe them
- debt consolidation – this is where you borrow money to pay off existing debts. This is also called re-financing. It might mean that you pay back interest at a higher rate and for a longer time than for some of the other options. You must take independent financial advice if you're thinking of doing this. Find out more about debt consolidation on options for dealing with debt.
Before you decide on an option to deal with your debt, you should get advice from a money adviser.
Talk to a money adviser
You can get free money advice from a money adviser at your local Citizens Advice Bureau.
Find out more about DAS on the Accountant in Bankruptcy website and in its Debtor Information Booklet.