Debt Arrangement Scheme

You’ll get protection from creditor legal action

• Your debts steadily reduce

• You don’t pay the admin fees as long as you complete your repayments (they’re a cost to your creditors)

• Current diligences (like a wage arrestment) can no longer be enforced

• Your creditors cannot make you bankrupt

• Interest costs (and other charges) will stop

• Your adviser deals with your creditors for you

• You make one regular payment

• You don’t have to pay your full disposable income

• The payment amount can change if your situation changes

• You have a budget for household bills and expenses

• It’s less likely than insolvency to affect employment

• Emergency payment breaks are available

• It isn’t personal insolvency (your assets aren’t involved)

• Debt does not usually get written off

• Your credit rating gets damaged

• Mortgages may become harder to obtain

• You cannot get credit (above a limit) without permission

• Might be a long plan if your debts are large or your regular payment is low

• Interest can get added back if you do not complete the repayment arrangement

• Your personal details get added to a public register

• If your scheme fails, you will remain liable for any debt that remains

You must have debts that you can’t afford to repay. You must have some surplus income to make a payment every month. Surplus income is the money left over after paying your bills and other expenses.

You must be able to pay the debts within a “reasonable” time period. What’s deemed to be reasonable depends upon your situation. There may be concerns if your DPP will run for longer than twelve years.

Your creditors can object to your proposals. If more than 10% of your creditors object, a “fair and reasonable test” is used by the Debt Arrangement Scheme Administrator (who may still approve the plan). Objecting creditors are bound by an approved DAS.

If less than 10% of your creditors object, your DAS is automatically approved. In reality, a high proportion of applications are approved.

You cannot apply if you’re bankrupt or in a protected trust deed at the moment. You also can’t be subject to a current Bankruptcy Restriction Order or Undertaking.

Most types of debts get included in a DAS Debt Payment Programme. They include:

• Credit card
• Store cards
• Council tax arrears
• Utility bill arrears
• Loans
• Overdrafts
• Catalogues
• Payday loans
• Credit unions
• Accounts with debt collection agencies
• Bounce Back Loan

Certain types of debts can cause complications, so read our pages about guarantor loans and joint debts if they apply to you.

You may be allowed to prioritise repayment of mortgage or rent arrears by repaying them outside of your DAS if necessary. You should seek expert personal advice about these types of debt:

Some debts always get excluded from a DAS Debt Payment Programme. They include:

• Your current mortgage payment
• Your current hire purchase payment

You will need to continue paying these types of debts.

Some debts always get excluded from a DAS Debt Payment Programme. They include:

• Student loans

• Child support or maintenance arrears

• Your current mortgage payment

• Your current hire purchase payment

You will need to continue paying these types of debts.

To apply for this type of statutory debt management plan, you need to contact an Approved Money Adviser.

You’ll find these advisers based within local services such as Citizens Advice. Some insolvency practitioner (trustee) firms also handle DAS work, including the firms represented on this website by our forum experts Kevin Mapstone and Paul McDougall, so please do not hesitate to get in touch with us if you wish to get direct advice about this option for your circumstances.

Joint DAS applications can be submitted, but the other party must be your spouse, civil partner, or a co-habiting partner.

The adviser checks your financial situation and you’ll supply information like payslips, bank statements, and debt details.

They work out what you can pay and advise you whether DAS is suitable for your needs.

The adviser makes the the application on your behalf and your proposals get sent to your creditors.

You may need to open a new bank account before your application goes ahead.

What if you’re at risk of enforcement action by your creditors?

You or your adviser can put a moratorium in place which protects you from creditor debt enforcement for a period of six months. Making this application should therefore allow you more than enough time and space to proceed with your DAS application.

A moratorium could help you if:

• You need more time to think about your options

• Your creditors are making legal threats

• The threat of legal action is affecting your health or wellbeing

Drawbacks associated with moratoriums include:

• Your credit rating may be negatively affected

• Your personal details are added to a public register

• Your debt level may increase as a result of interest and charges

You must meet certain conditions during your Debt Arrangement Scheme. These conditions include:

• Paying your continuing liabilities (like rent and council tax) on time

• Not applying for credit without permission

• Making the agreed payments into your Debt Payment Programme

• Promptly notifying your Administrator if your situation changes

If you breach the conditions, your DAS could get revoked (cancelled).

You don’t pay a fee for using a Debt Arrangement Scheme.

A “payment distributor” receives your regular payment. 22% of it is kept to cover various fees and 78% is sent to your creditors.

Your creditors must reduce your debt balance by 100% of your full payment as long as you complete the DAS programme successfully, so they’re effectively covering the admin costs of this debt solution.

Example: You pay £100 into your DPP. £22 is kept to cover fees/costs, £78 is sent to your creditors, but your total debt owed reduces by £100.

This fee information doesn’t apply if you started DAS before 4th November 2019. If you previously agreed to pay fees, the fees will continue to apply.

The Debt Arrangement Scheme is also available to some businesses including partnerships, trusts, and unincorporated bodies.

It is not available to a limited company or a public company, or to businesses that trade outside Scotland.

Business Debt Arrangement Schemes are arranged by a DAS approved insolvency practitioner. The Debt Payment Programme (DPP) must run for five years or less.

A business is protected from its creditors if their scheme gets approved.

Many homeowners use DAS because (unlike trust deeds and bankruptcy) no account is taken of equity in your home. DAS also takes no account of other assets like vehicles.

This option may be suitable if your debts aren’t huge. Freezing interest and charges means your debt can be repaid sooner.

Payments in trust deeds (or bankruptcy) last for four years and some people can repay their debt sooner via DAS.

You may prefer DAS if you’re determined to repay your debts in full. Trust deeds and bankruptcy typically result in debt write-off, while a Debt Payment Programme results in your creditors getting most of their money back.

Some workers have insolvency restrictions in their employment contracts. DAS isn’t insolvency and it provides legal protection (which might be important to your employer as well as to you).

Do you expect to receive a lump sum (or property) in the future? In DAS you can use this money or asset as you choose, but in bankruptcy or a trust deed you must hand it over.

Many Scottish residents use debt management plans which work quite similarly to DAS.

You pay back the amount that you can afford until your debts are fully repaid. A debt management plan (DMP) has three major weaknesses in comparison:

• No formal legal protection from creditors

• No guarantee that interest and charges will stop

• No power to deal with an objecting creditor

Potential advantages of debt management plans compared to DAS:

• No entry on a public register

• Expenditure restrictions may be less rigid

• Greater flexibility

There are some valid reasons for preferring to use a DMP. Most people will however benefit from choosing DAS in the first place, or from switching to DAS from an existing debt management plan.

A Scottish trust deed offers two major potential advantages compared to DAS:

• You may become debt-free sooner

• Some of your debt may be written-off

There are also disadvantages to consider:

• Your assets will be taken into account

• Personal insolvency may damage your credit rating more

• Some types of employment may be affected

If you’re currently using the Debt Arrangement Scheme, you are allowed to switch to a protected trust deed. This may be especially attractive if your DAS is a long arrangement (some run for ten years or longer).

Your Debt Arrangement Scheme is automatically cancelled if you start a trust deed in Scotland.

Becoming bankrupt also offers potential advantages compared to DAS:

• No monthly payment if you cannot afford it

• You may become debt-free sooner

• Some of your debt may be written off

Some potential disadvantages include:

• Your assets will be taken into account

• Personal insolvency may damage your credit rating more

• Some types of employment may be affected

If you’re currently using the Debt Arrangement Scheme, you are allowed to switch to bankruptcy. This may be especially attractive if your arrangement is very long, you own few assets, or if your ability to pay into your DAS has reduced.

Using bankruptcy (also know as “sequestration” in Scotland) will result in the automatic cancellation of your DAS.

For expert advice about the Debt Arrangement Scheme (and other debt solutions) please contact us. Our friendly expert advisers will guide you through your options.

We can also help if you’re considering switching from a DMP to DAS, or switching from DAS to a protected trust deed or bankruptcy.