Debt Arrangement Scheme
If you are struggling with debt and you live in Scotland, you may be wondering whether to apply for a debt payment programme under the Debt Arrangement Scheme. Doing so might help you to repay the money you owe in a more manageable way. However, like any debt management solution, it can have a serious impact on your financial health and your life more generally, so it’s important to get specialist advice before you make a decision.
Before you enter any Debt Arrangement Scheme, you should make sure that you are only paying money to creditors if they can prove you owe it to them. They might not have fulfilled their legal obligations when lending to you, or they may not be able to justify the sums they are demanding. At Galahad & Co., we can help you to defend your rights as a consumer and ensure you don’t end up paying a penny more than you need to.
What is the Debt Arrangement Scheme?
Set up by the Scottish government, the Debt Arrangement Scheme (DAS) is intended to help people to pay back debts in a more controlled, convenient way without the threat of court action from creditors. Under the DAS, you can establish a debt payment programme (DPP) that consolidates multiple debts into one affordable payment, meaning you no longer have to make multiple payments to different companies. The money you pay into the DDP is divided up between your creditors.
A DPP is a legally binding agreement that enables you to repay money you owe, while leaving you with enough income to cover living costs and household bills. Any interest or charges that are being added to your debts are frozen once you apply for the scheme, and your creditors can’t get in touch with you or take further legal action against you.
If your circumstances change after you enter into a DPP, you can apply to vary your payment or ask to have a break in payments – but bear in mind that any break will be added onto the end of your DPP. Once you have completed your payment programme, your debts will be paid in full.
The DPP will last for as long as it takes for you to repay your debt in full. This may be many years, depending on your level of debt. There is no limit to the level of debt that can be included in a DPP and no maximum period that it can take to pay back the debt.
In England and Wales, a debt management plan is the alternative to a DPP.
Is the Debt Arrangement Scheme a good option for me?
You can apply for this scheme with any amount of debt, and you can do so alone or with your civil partner, spouse or cohabiting partner if you are both liable for at least one debt. The scheme is intended for people who have enough money to ensure they can make regular payments, and who have sufficient money to repay what they owe over a reasonable period of time.
A DPP is the only statutory debt management scheme in the UK. Our experience is that there is little or no knowledge of this option or the protections it provides; this is a good solution for many people in Scotland who are struggling with debt.
● You won’t have to sell off belongings or property (including your home) as you might have to do with certain other debt solutions, such as bankruptcy or sequestration.
● Debt and interest charges are suspended for the duration of the DPP and then cancelled when it is complete.
● When you apply for a DPP under the DAS, you can ask the Accountant in Bankruptcy to stop creditors from taking action to recover money you owe. This is referred to as a moratorium and it lasts for six weeks.
● Setting up a DPP doesn’t stop you from working in specific roles or being elected to public office, unlike certain other debts options, including bankruptcy/sequestration.
● Your payment programme could last longer than some insolvency solutions.
● Your credit rating will be affected for as long as you’re in the DPP.
● You are restricted in terms of what you can borrow when you have a DPP. In most instances you will not be able to borrow more than £2,000.
● Details of you DPP, including any variations, will be published on the DAS register, which is a publicly available record. Your details will be published here as soon as your application has been made.
● You will repay what you owe in full.
The importance of getting expert advice
It’s important to be aware that the DAS is just one of a number of options available to help you deal with debt. If you’re thinking about setting up a DPP under this scheme, it’s important to get expert and impartial advice first. And before you commit yourself to a debt solution like this, take a step back and ensure that you are fully informed when it comes to your consumer rights regarding debt.
You should not pay creditors any money unless they are able to prove you owe the sums they are asking for. This is where the specialists at Galahad & Co. can help. Our experts can challenge lenders’ claims on your behalf. Using this approach, we have saved our clients more than £3 million.