What is a Debt Relief Order and how does it work?
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Live in Scotland and think you may need a debt solution? Our blog should help.
Yesterday we went through what a DAS is and how to find out whether you qualify for one and what can be included in one. Today let's look at how much is costs to start one and the pros and cons of this kind of arrangement.
How much is a DAS?
If DAC arrange the DAS for you, there will be an initial fee and then a monthly fee to pay. The initial fee is equal to one month your agreed regular payment, but never any more than £475. This is used to cover the work involved in setting up the DAS, including preparing and presenting your application to you lenders.
As this initial fee is used solely for the purposes of paying for the administration of your DAS, your debt will increase slightly, due to interest and charges still being applicable at this stage in the process. But once the initial fee is paid, all other monies, apart from the monthly fee, which we explain below, will be put towards your debt.
The monthly management fee is calculated as 15% of each of your regular monthly payments, but will never be less than £32.50 or more than £85. This fee is used to pay for the ongoing administration of your debt, which includes the distribution of the monies to the lenders. You can pay this weekly, monthly or every two weeks or every four weeks, whichever suits you best.
There’ll also be a yearly review of the DAS to make sure it is still the best debt solution for you. If your circumstances change, you should let us know so that we can carry out the review sooner. We can negotiate with the lenders for you if you need to ask them to change the payment amounts and help you find a more suitable option if it becomes clear a DAS is no longer right for you.
There are other places where you can get advice for free and your DAS DPP set up, with only the 2% application fee and payment distributor fee of no more than 8%, to cover their costs, being deducted from your monthly amount. The Scottish Government’s DAS website can help you find a money advisor who can help you set up your DPP.
The ups and downs of DAS
However, as with all debt solutions, there are some downsides, as well as the obvious benefits you’re getting. Your name will appear on the publically accessible DAS Register until it ends the arrangement is over. There will also be an effect on your credit score that will show on your credit record for six years. This is likely to affect your ability to get credit in the future, making it difficult or more expensive than it would be if your credit score was good. You will also be in debt for longer because you’re paying lower amounts each month. And, whilst you’re in the DPP, you will need the permission of the DAS administrator if you want to apply for further credit.
You can read more about DAS here, and if you’d like to talk to someone about your options, our advisors are ready and waiting. Just choose one of the ‘contact us’ options on the left of the page. Or you can contact the Money Advice Service for free, impartial advice.
This is only one of a number of debt solutions available in Scotland. If this is not suitable for you, you should seek advice on the others available, such as Trust Deeds or Sequestration, the Scottish version of bankruptcy.
by Shelley BowersBack to blog home