The Debt Arrangement Scheme explained

What is the Debt Arrangement Scheme in Scotland?

Set up by the Scottish government, the Debt Arrangement Scheme, which can also be shortened to DAS, is there to help individuals struggling with their debts. With the Debt Arrangement Scheme, you’re able to pay back your debts in a more manageable way, through a debt payment programme (DPP).

DAS also gives you some other protections from creditors (the people you owe money to). For example, they won’t be able to take court action against you or make you bankrupt. Once your debt payment programme is in place, your creditors shouldn’t contact you either.

It’s worth noting that the Debt Arrangement Scheme is only available to residents of Scotland.

We’ve got a separate debt solutions guide that goes through other options available for those living in England, Wales, and Northern Ireland.

What is a debt payment programme (DPP)?

As part of a Debt Arrangement Scheme, a debt payment programme (DPP) allows you to repay your debts by making one monthly payment of the amount which you have left over each month after paying your essential bills and expenses. Essentially, this refers to the way in which you pay back your debts under the scheme.

The amount you would pay per month is based on what you can afford after essential living costs such as food, bills, and your mortgage or rent. This money would then will be paid directly to the money adviser who would then share these funds between your creditors.

How long does the Debt Arrangement Scheme last?

There is no defined period of time that a Debt Arrangement Scheme lasts for. Instead, it will last for as long as it takes you to pay back the debts you owe and complete the debt payment programme mentioned above, provided that the time period is ‘reasonable’.

The meaning of reasonable is not the same for everyone, therefore, how long it takes to complete your debt payment programme and the Debt Arrangement Scheme will vary depending on your unique individual circumstances.

How much does the Debt Arrangement Scheme cost?

It is free to apply for a Debt Arrangement Scheme. There is an administration fee for the running of the debt payment plan, but your creditors are the ones who will have to pay this fee.

Eligibility requirements for the Debt Arrangement Scheme

Similar to other debt solutions, there are certain criteria you have to meet in order to be able to apply for the Debt Arrangement Scheme. To be eligible you must:

• Have one or more outstanding debts
• Live in Scotland
• Have received advice and assistance from an approved money adviser
• Have enough money left over to pay into the debt payment programme after essential living costs like bills, food, and mortgage or rent.

Alternatively, you won’t be eligible to enter the Debt Arrangement Scheme if:

• You’ve been declared bankrupt
• You’ve been subject to a bankruptcy restrictions order or a bankruptcy restriction undertaking
• You’re in a protected trust deed
• You don’t have an appropriate amount of money or assets to pay into a debt payment programme
• You’re paying debts under a conjoined arrestment order

How to apply for the Debt Arrangement Scheme

If you want to apply for the Debt Arrangement Scheme, you’ll need to get help from a money adviser. It’s important to make sure you’re checking they’re a DAS approved money adviser. Approved money advisers won’t charge you for debt advice and support.

You can tell if they’re approved or not based on whether they’re authorised by the Accountant in Bankruptcy (AiB). You can search for AiB approved money advisers on the AiB website.

The AiB is the part of the Scottish Government which runs the Debt Arrangement Scheme. Money advisers must be authorised in order to apply for debt payment programmes through the Debt Arrangement Scheme.

If you’re unsure about anything to do with applying for the Debt Arrangement Scheme, you can reach out to trusted independent organisations such as StepChange or Advice Direct Scotland.

What debts can be included in a Debt Arrangement Scheme?

When setting up a debt payment plan under the Debt Arrangement Scheme, you can include existing debts such as:

• Credit cards
• Buy now, pay later debt
• Payday loans
• Personal loans
• Bank account overdrafts
• Missed payments (or ‘arrears’) of utilities, rent, mortgage, and council tax

In most cases, you need to include all your relevant outstanding debts in the debt payment plan. For mortgage and rent arrears, you can choose yourself whether to include them or not. It’s important to obtain advice from an approved money adviser to understand the possible implications of including such arrears.

If you forget to include a debt, you may be able to add this at a later date by speaking with your money adviser. However, unless the debt existed before setting up the debt payment plan, you won’t be able to add any other debts after it’s been set up.

Are debts written off with the Debt Arrangement Scheme?

No, your debts won’t be written off once you enter a Debt Arrangement Scheme and you’re still liable to pay them off in full. However, interest and other fees will be frozen during this time.

Does a Debt Arrangement Scheme affect credit rating?

In short, yes. Once you enter a Debt Arrangement Scheme, your name will be added to a public register and this information will be directly shared with Credit Reference Agencies including TransUnion, Equifax, and Experian.

This information will then appear on your credit file and could impact your credit file. Potential creditors will also be able to view this information which may make future lending harder.

Can you finish a Debt Arrangement Scheme early?

Yes, it is possible to finish a Debt Arrangement Scheme early.

If your financial circumstances improve, you can finish early by paying a lump sum to clear your balance. However, you should contact your DAS approved money adviser for guidance before doing so.

Alternatively, in very rare circumstances, your creditors may agree to write off the debts earlier than planned.

AiB, who run the scheme, will cancel your DAS if any of the following happen:

• You apply for bankruptcy
• You get a protected trust deed
• You’ve got a joint DPP and separate from the partner involved (this includes if a partner dies)

Other reasons AiB can also cancel your DAS include:

• You break the terms of your debt payment programme
• You miss three payments without an approved payment break
• You purposefully gave wrong information about your debt payment programme

What happens if a DAS is cancelled?

If your DAS is cancelled by AiB then you become liable for the debt again.

This means you still owe your creditors the outstanding debt balance along with any interest, fees, and charges that would have added up during your DAS.

To appeal the decision, you’ll need to contact AiB. In the case of a joint DAS being cancelled, it might be that you can apply for an individual DAS instead.

You can find out more about appealing an AiB decision on the mygov.scot website.

Advantages of Scotland’s Debt Arrangement Scheme

• You don’t need to sell assets such as your home or car
• Only need to make one monthly payment after establishing what you can afford each month. This will be paid to an approved payment distributor who will then sort out the amount owed to your creditors
• In most cases, creditors won’t be able to take court action in order to recover the debt
• There are no additional fees involved with setting up a Debt Arrangement Scheme.
• Interest, fees, and charges on debt(s) included in the Debt Arrangement Scheme will be frozen from the date you apply for a debt payment programme and will be fully written off after you’ve completed the debt payment programme
• Protection from creditors taking legal action including enforced bankruptcy or court action
• Creditors can’t contact you whilst you’re on a debt payment programme

Disadvantages of Scotland’s Debt Arrangement Scheme

• Evidence of your debt payment programme will remain on your credit file for a minimum of six years
• There is no fixed period for a debt payment programme, it will last until you’ve fully paid off your debts which may take longer than other options. You should speak to an approved money adviser to understand all of the options available to you
• It can negatively impact your credit score

If you choose to include mortgage or rent arrears on a debt payment programme, your lender or landlord may take steps to recover possession of your home. Your money adviser should take you through the pros and cons of including, or excluding, mortgage or rent arrears.

Can Lowell help me apply for a Debt Arrangement Scheme?

If you’re a Lowell customer, we can’t offer you direct support with applying for the Debt Arrangement Scheme. However, we can put you in touch with organisations who will be able to help, and we’ll ensure that you’re given the time necessary to do this by placing a hold on your account.

We always want the best for our customers and understand that you might not be in a position to keep up with your debts right now. If you do successfully apply for the Debt Arrangement Scheme, please get in touch and let us know so that we can update your account accordingly.

Before making a final decision about entering into a Debt Arrangement Scheme, you can speak to independent organisations such as StepChange or Advice Direct Scotland for guidance on the best next steps for you.

For more information on debt-related topics and how we work here at Lowell, you can check out the rest of our Debt Guidance Hub or the Lowell blog.