Debt arrangement scheme

Introduction

The debt arrangement scheme (DAS) is a debt management tool which was introduced in Scotland in November 2004 for people with two or more debts who could pay what they owe given more time. They may be people who have lost a well paid job, or suffered ill health.

It is believed that DAS has the following advantages:

• a money adviser is involved so payments are fair;
• payment is made in full, unless otherwise agreed;
• DAS avoids bankruptcy; and
• DAS avoids the costs of court enforcement

Once a DAS is in place cannot a creditor cannot:

•  enforce debt by using diligence, such as earnings arrestment; or
•  make the debtor bankrupt.

It does not affect a creditor who holds a standard security over property in Scotland from calling up and realising their security.

How is a debt payment programme (DPP) under DAS set up?

Anyone wanting to use DAS must apply for approval of a DPP. To do this they have to approach a trained and approved money adviser who will then work out the client's financial circumstances. The money adviser will approach the creditor to confirm how much is due and will make an offer to pay by instalments where possible.

The offer will be less than payment due under the contract as all money which is available for distribution is divided up amongst all the creditors pro rata, which means that everyone gets a fair share.

The creditor may be approached to waive or freeze interest but the creditor can refuse to do so.

Creditors must reply to the offer within 21 days in order to affect any DPP. If a creditor does  not reply then they are assumed to accept the offer.

The money adviser applies to DAS administrator for approval of the DPP. If all creditors agree to the DPP then it will be approved. An agreed DPP can be for any amount or over any period.

If some creditors do not agree then the DPP will be approved, if fair and reasonable. There is no hard and fast rule as to what is fair and reasonable but broadly a DPP of less than 5 years is likely to be considered reasonable and one of over 10 years is likely to be refused.

Objection by creditors

Creditors can object to the courts if the person applying for DPP:

• has no hope of paying and should be made bankrupt; and
• has a lot of money tied up in land and buildings.

Variation of DPP

A DPP, once agreed, can be varied if circumstances change. This may mean creditors receive more or less than under the original DPP.

Payments under a DPP

Once a DPP has been approved payments will be made through a payment distributor. The payment distributor is entitled to charge for their services. The charge which will be paid by the creditor cannot exceed 10% of each payment.

Register of DPPs

A register will be maintained of all DPPs entered into. It is expected that lenders will search this register as part of their credit reference checks before lending money.

Further Information on DAS

The MoneyScotland  provides general information and advice on debt.