Debt Arrangement Scheme. What is it?

What is the Debt Arrangement Scheme (DAS)?

The Debt Arrangement Scheme (DAS) is a statutory debt management tool overseen by the Scottish Government. It lets you apply for a debt payment programme (DPP) to repay your debts over a reasonable period by making affordable monthly payments.

The Debt Arrangement Scheme (DAS) is not available if you live in England, Wales or Northern Ireland. In these countries, a debt management plan (DMP) is a similar solution, but it’s important to note that it has different benefits and risks associated with it.

How much does a DPP cost?

When you enter into a DPP with us, the costs are covered by all the creditors in the DPP. You don’t make any additional payments.

When a DPP is approved, 22% of your payments will be deducted to cover the running costs of the programme. This percentage is set in law.  Your creditors will write off this amount from the debt owed. There are no other fees.

When does a DPP end?

A DPP ends when:

  • You’ve made all the payments you agreed
  • The debt is cleared with a lump sum payment, or
  • All the creditors included in your original DPP agree to complete it before it was due to end

When one of these things happens, you’re no longer liable for any payment towards the debts, and you’ll be debt free.

A DPP is a Scotland-based debt solution offered through the Debt Arrangement Scheme (DAS). It’s only available to people who reside in Scotland. The monthly DPP payment is based on the amount of money left over once all household bills are paid, rather than the amount the creditors may be asking for.

Is a Debt Arrangement Scheme (DAS) right for you?

Advantages of a Debt Arrangement Scheme (DAS)

Only pay what you can afford to your debts

Avoiding going insolvent

Protect your assets

Only pay back your debt, your creditors cover administration costs

Freeze interest and charges 

Stop contact, legal and enforcement action from your creditors

Disadvantages of a Debt Arrangement Scheme (DAS)

Only available in Scotland

Can take longer to repay

If you delay to start paying your DAS creditors can still take action against you

No debt is written off

Your credit file will be effected for a minimum of six years

Your details will be placed on the DAS register

Is a DAS suitable for me?

A DAS will work for you if:

  • You live in Scotland
  • You have money left over once you’ve paid your household bills
  • You owe money to one or more organisation or person

Each month you make an affordable payment to your DAS. This payment is then shared between the different creditors that you owe money to. A percentage of your monthly payment is deducted to cover the running costs. As your money advisor and payments distributor we will retain 20% and 2% is sent to the Accountant in Bankruptcy who acts as the DAS administrator and oversees the Scheme on behalf of the Scottish Government.

Your DPP can be for any amount of money as long as you repay what you owe in a reasonable amount of time. If you’re not able to repay in a reasonable amount of time there may be other debt solutions open to you, like sequestration, the Scottish term for bankruptcy.

Setting up a DPP

Your DPP is set up and managed by a contining money advisor. All money advisors must be fully trained and approved under the Scheme.

If a DPP is the best option for you a proposal is put forward to your creditors and they have 21 days to decide whether or not they’re happy with this. Even if your creditors don’t agree to this proposal your DPP could still be approved by the DAS Administrator, if they think it’s fair and reasonable to do so.

If your DPP is approved you make one monthly payment to a payments distributor and they share this money between your creditors.

If we recommend a DPP as your best course of action, we can set this up for you. All the costs of your DPP are covered by your creditors.

What is the DAS register?

When you apply for a DPP your details will be put onto the DAS register. This is an online register that anyone can access. It has information about everyone who’s in the process of applying for, or is on, a DPP. This is so that your creditors know you’re on a DPP, and can’t take court enforcement action against you.

Are interest and charges stopped on a DPP?

From the date you apply for a DPP your creditors have to:

  • Freeze any interest or charges being applied to your debts
  • Stop taking any further court or enforcement action
  • Stop sending you letters asking for payments

If your DPP is not approved or you stop paying your DPP, your creditors can apply interest and charges on your debts and take court enforcement action again.

Changes to your situation while on a DPP

If your situation changes while you’re on a DPP you can apply for your payment to be varied. Your creditors and the DAS Administrator will consider the impact of the change (for example, if you reduce your payment how long will it take for the debts to be repaid?) and decide whether to approve it.

If you have an emergency or crisis where you need to pay for an unexpected cost, such as a car breakdown, you can request a short-term break of one month. Your money advisor can approve this and will let your creditors know. You can request up to two of these in a 12-month period. Your payment will not change but your DPP term will be extended to cover the break.

If you have a short term ‘income shock’ while you’re on a DPP, and as long as your disposable income has been reduced by 50% or more, you can apply for a payment holiday. Income shocks can be the result of a number of things, including:

  • Being made unemployed or changing jobs
  • Maternity or paternity leave
  • Not being able to work because of illness
  • Divorce or separation, including from a co-habiting partner
  • A reduction in tax credits or benefits payments

A payment holiday will mean that you can have up to a six month break from making payments towards your DPP. However, the payment holiday term will be added to your DPP.

What to expect when you complete your DPP

A DPP comes to an end when all the agreed payments in the programme are paid off.  Alternatively, you can make a lump sum payment equivalent to the outstanding amount due.

Your creditors will write to you to confirm that your DPP is coming to an end shortly before the scheduled date for completion. Your details will be removed from the DAS register and the creditors will be informed that debts included in the DPP are paid in full.

If you’re paying through your wages, the DAS Administrator will let your employer know that the DPP is complete, and the payments will stop. You’re now no longer liable for any debts included in the DPP, as well as any interest or changes which would’ve accrued after the start date.

Credit referencing agencies and DPPs

When credit referencing agencies (CRAs) create your credit file, they’re essentially building a picture of how you behave financially. Banks and credit card companies can then decide whether to give you credit based on their information.

Get in touch with a credit rating agency to see what your credit score is. There are three main ones in the UK:

Credit Karma (powered by TransUnion, formerly CallCredit)

Clear Score (powered by Equifax)

Experian

You can check your report for free, online or request a paper copy for a one-off small fee. Once you’ve received the reports check all the details and compare them. These should show you your credit history for the last six years.

Understanding your credit file

The next thing you should do is check your credit file. Each agency provides guidance on how to read your report:

Credit Karma FAQs

How to read your Equifax report

Understanding your Experian report

Checking your credit file

Once you’re comfortable reading your report, check the following:

  • All debts included in your DPP should be listed as starting on or before the start date for your DPP
  • Make sure that all the debts included are now showing as completed
  • If there are any debts that were included in your DPP that are still showing as outstanding you should write to your creditor to ask them to update this

If there were exceptional circumstances, such as redundancy, that led to your debt you can also request to add a note to your file called a ‘notice of correction’ which lenders are required to read

How to improve your credit file after a DPP

Often the best way to approach this is to take out some form of credit, such as a credit card, with a low limit. Never miss a payment and make sure you always stay within the agreed credit limit.

By getting a small amount of credit and behaving responsibly with it you’ll start to build a better credit history and gradually begin to improve your credit file. This can be useful if you’re thinking of getting a mortgage in the future.

Or, you can find more information on MoneyAware about how to improve your credit rating without taking out new credit.

Looking to the future

After working hard to clear the debts included in your DPP, you may be wary about taking out any form of credit again.

However, if you want to improve your credit file you’ll need to allow yourself limited access to credit, or perhaps a credit card for emergencies. Just make sure you stick to your budget, and always pay back anything you owe in full every month.

Considering a Debt Arrangement Scheme (DAS)?

Debt Arrangement Scheme (DAS) is a specialised area of Scottish debt advice. If you haven’t already received advice from us, make sure it’s the best solution for you by contacting us. We’ll provide you with a tailored budget and the best solution to help you deal with your debts.

See our Frequently Asked Questions on Debt Arrangement Schemes