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Tackling your debts

Debt Arrangement Schemes and how they work

Posted 25 April 2017 by Christine Walsh

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DAS lowers your unsecured repayments, freezes interest and charges and protects you from legal action, but there are drawbacks.

A Debt Arrangement Scheme (DAS) is a formal debt solution available in Scotland. It allows you to repay all your unsecured debts at a lower, affordable monthly rate by starting a Debt Payment Programme (DPP). Your payments are based on what you can afford, rather than the original agreement you signed when you first borrowed the money.


In this blog we’re going to look at this solution in a bit more detail. Remember that this solution is only available to residents of Scotland. If you live in another area of the UK, Debt Management Plans (DMPs) offer similar benefits.


How do they work?


DAS is a way for people to tackle the problem of unmanageable debts.

This is a formal solution, made available by the Scottish Government and allows you to bring your payments down to a level that you can afford. As such, you have to be able to afford to put something towards your debt in order to qualify for this solution.

If you don’t have anything to put towards your debts each month, then there are other solutions that may be more suitable for your needs.


Your new payment plan is known as a Debt Payment Programme (DPP). It will be different for everyone and depends on what you can afford to put towards your debts once all your other essential costs are paid for. The point of this solution is to put you back in a position where you can afford to put something towards your debts but you’re also able to maintain a reasonable standard of living and pay for the other important things in life. Your payments are set at a level that leaves you enough money to cover things like food, your rent, essential transport, gas and electricity bills, and so on.


DAS gives you legal protection from your creditors, which means they won’t be able to take any legal action against you once your programme is approved. They are also obliged to freeze interest and charges on your debts, so they won’t be building up as you’re paying them off.


Are there any downsides


There are a few downsides to starting a DAS, including the damage to your credit history. DAS will affect your credit history because, although you are paying back your debts over an agreed period of time, you are no longer making your contractual monthly payments and so your creditors may issue a default against you.

Defaults on your credit history may affect whether you’re successful in applying for services or credit in the future. For instance if you apply to rent a home or for a mobile phone contract the provider will usually do a credit check. If you want to borrow money, you might have to pay more in interest as a result, or you might find it harder to be approved for lending. This is unlikely to impact you whilst you are on the solution, as you’re not allowed to take out credit for the duration of your DAS, unless it is for an emergency and approved by the DAS Administrator first. There are ways to build your credit rating back up again after a debt solution which you can look into once your DAS is complete.

You will also be added to the DAS register. This is an online list of people who have either applied for a DPP or who have one already. It’s maintained by the DAS administrator and is mainly used by credit reference agencies as well as creditors. Having said that, the register is publicly available and anyone is able to search it, although they would need a reason to search for you to begin with.


You can only use a DAS to pay off unsecured debts – such as credit cards, personal loans and store cards - which means you have to keep up with any secured payments, like your mortgage, at the same time as paying your DPP. However, your DPP payment is calculated so that you can afford to pay everything you need to each month.


What’s the next step?


The next step is to make sure this is the right solution for your circumstances before you apply. You can do this by having a chat with a debt advisor, and seeing what they say. An advisor will go through your personal finances and tell you whether DAS could be an option for you. If it’s not, they will be able to recommend a course of action, which might be another debt solution or simply making changes to your budget and the way you use your money.


You can get in touch with one of our trained advisors using the options at the top of the page. There may be fees involved with some solutions once they’re up and running, but the initial advice we give is always free of charge.

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.