The Scottish government offers the Debt Arrangement Scheme, or DAS, to Scottish residents as one way to manage unsecured debt.
With the help of an accredited money advisor, an individual in debt creates a DAS Debt Payment Program, or DPP.
This reveals the amount of unsecured debt that can affordably be repaid each month and how long it will take to fully repay these debts. When combined with a monthly budget, a DPP helps people repay money owed at a level and pace that they can afford.
A DAS is an excellent way to handle debt repayment but not everyone qualifies. Only residents of Scotland with two or more unsecured debts unable to be repaid under original creditor terms and conditions will be considered.
A DAS is not intended to reduce the amount of money owed, only to reorganize payments to make them more affordable.
The individual pays what can be afforded after living expenses are covered
With a DPP approved and in place, an individual is protected from any creditor actions. In addition, interest and other fees are frozen so the total debt will not increase. Unlike many other debt management programs, equity is not released from property to repay debts.
In addition, the individual may remain in the home as long as mortgage or rent payments are kept current
The home is not at risk of repossession, something that cannot be said for many other debt solutions.
Many Scots find that a DPP helps them organize their debt repayment. Instead of making a payment to each creditor on a different day each month, the individual writes one check that covers all debt payments due that month.
A payment distributor appointed by the DAS money adviser takes this payment and distributes the appropriate amount of money to each creditor, per the DPP arrangements.
Though debt balances are not written off, a DAS does have a negative effect on the credit rating. Repayments do not follow the rules of original creditor arrangements and a DPP is publicized on the DAS register. This makes it more difficult to obtain credit in the future.
The longer timeframe for debt repayment results in a prolonged wait to become debt-free. A DAS period is not subject to any restrictions, continuing until covered debts are repaid in full.
A DAS is often compared to sequestration, the term for bankruptcy in Scotland
Which one is better depends on financial situation. People who can afford to repay multiple unsecured debts usually choose a DAS. If they cannot afford to do this, sequestration is usually the best choice.
This requires selling assets to repay unsecured debts and writing off the remaining unsecured debt balances.
People who have the financial means to repay debt balances but require additional time should consider a DAS. Under this program, assets are untouched and the home is not at jeopardy of repossession.
Though credit is negatively affected and no debt is written off, a DAS is a convenient way to become debt-free and begin creating a stable financial future.