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Living on a debt solution

The pros and cons of a Debt Arrangement Scheme

Posted 24 August 2016 by Christine Walsh

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Find out how a DAS will affect your life by exploring the pros of cons of this Scottish debt solution.

If you live in Scotland and you’re struggling to make your repayments on your unsecured debts, a Debt Arrangement Scheme (DAS) is one solution you can look into. But what are the pros and cons of this solution? How will it affect your life if you start this kind of plan? 

In this blog we’re going to outline all the pros and cons associated with DAS so that you have a clear idea of how it actually works. While we can give you the facts in this blog, please remember that you’ll only know for sure whether this solution is right for you by speaking to a trained debt advisor.

So let’s get stuck into the upsides and downsides of DAS. If you’re looking for a similar solution available in England, have a look at our page on Debt Management Plans (DMPs)

The pros

The main advantage to a Debt Arrangement Scheme (DAS) is that you will be able to repay all your unsecured debt but at a rate that is affordable and sustainable for you. You do this by starting something called a Debt Payment Programme (DPP). Your payments are affordable because when they are worked out the vital spending for yourself and your family is taken into account first. So you only pay what you can afford towards your debts after rent, utilities, taxes, food and so on – and you then continue to pay this amount until the debt is cleared. 

If you’ve been unable to manage for a while, this will definitely be a weight off your mind and allow you to budget more easily. 

Another positive aspect of this solution is that you are legally protected from any further action by your creditors. If you get behind with your payments, your creditors can take action to try to recover the money. This may take the form of a decree (court order), or your creditors trying to take the money directly from your wages or benefits. DAS is a formal, legally binding solution for you and your creditors, so once it starts they can’t take any further legal action. This in itself should mean that you’re less stressed day-to-day about your debts. 

If you apply for a DAS, your creditors are informed of it before it goes ahead. They are given the chance to vote on whether it goes ahead or not, however the final say does not rest with them. The Accountant in Bankruptcy (AiB) makes the decision in the end, so it can overrule your creditors’ decision. The AiB is an executive agency of the Scottish Government and they make sure that the process of debt management is fair for everyone involved. 

If you start a DAS, then the interest and charges on the debts is definitely be frozen – this is not guaranteed with informal debt solutions like Debt Management Plans (DMPs). So your debts won’t be building back up as you’re paying them off on the plan. 

There’s no minimum or maximum amount of debt you have to have in order to qualify for this solution. Whether it’s right for you will simply depend on how much you have to put towards your debts each month and how long it will take you to pay your debts off on the plan. 

There’s also no set minimum or maximum time period that you have to be on the solution for. Your Money Advisor will look to see whether you can pay your debts off in a reasonable and realistic timeframe. Of course, what’s reasonable for one person may not necessarily be reasonable for another. Your Money Advisor will look at your future plans as well as your current situation to determine whether it’s the right solution for you. 

Looking at the advantages above, it’s clear to see why DAS can be the right way forward for some people. Here’s a quick summary before we move onto the disadvantages. 

• You’ll have lower, affordable monthly payments on your unsecured debts.

• Less contact from creditors and the AiB has the final say in whether it goes ahead.

• Your interest and charges will definitely be frozen while you’re on the plan.

• There’s no minimum or maximum debt level or timeframe for how long you need to be on the solution.

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The disadvantages

As with any debt solution, there are some downsides you need to be aware of before you apply for a Debt Arrangement Scheme (DAS). 

As you will be reducing your payments, it may take you longer to pay off your debts than you originally thought when you took the credit out. 

A DAS will have a negative effect on your credit history and it stays on it for at least six years. Anyone who runs a credit check on you will be able to see that you haven’t been able to maintain your contractual payments. This may mean that in the future you find it more difficult or more expensive to get credit or services that require a credit check (a mobile phone contract or a tenancy agreement, for example). 

If you don’t stick to the rules of your DAS, it can be revoked. If this happens, interest and charges can be added back on and backdated to when they were stopped and your creditors can pursue legal action. 

Every DAS is recorded on a publicly accessible register called the DAS Register. In theory, this means anyone can search for your name on this register and see that you have started a solution to deal with unmanageable debts. In practise however, it’s mainly used by people involved in the running of your solution and credit reference agencies. 

To sum up, here are the downsides:

• it may take you longer to repay your debts,

• it will cause damage to your credit history, potentially making it more difficult to obtain credit in the future,

• your DAS may be revoked if you don’t stick to the rules, and

• your solution will be recorded on the DAS register. 

The next step is to get expert advice

As we said at the start of the blog, you need to get expert advice before you start any kind of debt solution. In fact, you can’t apply for a Debt Arrangement Scheme (DAS) until you’ve spoken to a Money Advisor – someone with the specific training to recommend this solution. 

There’s loads of help available – if you’re unable to repay your debts speaking to an expert is definitely the right thing to do. You can use any of the options on the left of the page and speak to one of our advisors today for free. There may be fees associated with ongoing services but they are based on your affordability and the advice we give is always free of charge. 

Alternatively, you can seek free and impartial guidance on all kinds of financial matters from the Money Advice Service.

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.