Scottish residents in debt have a debt arrangement scheme at their disposal as Scottish people have not been immune to the effects of the global financial crisis.
Many of them are finding it difficult to make ends meet and others have already slid into debt.
Before the debt situation becomes irreversible, these consumers should explore the debt solutions available to Scottish residents.
A Debt Arrangement Scheme (DAS) is a popular option offered by the Scottish government.
What Is A DAS?
The statutory debt management schemes referred to as a Debt Arrangement Scheme was created to help Scottish residents repay previously unmanageable unsecured debts. Under this program, individuals repay the money they owe at a manageable pace.
An accredited Money Adviser helps an individual develop a DAS Debt Payment Program (DPP). This plan details how much the individual can afford to pay each month toward unsecured debts. It also illustrates how long it will take the person to repay the debts in full at that payment amount.
The monthly payments established through the DPP are based on the amount the individual can afford after expenses for rent/mortgage, food, and regular monthly bills are taken into account.
In addition to the repayment proposal, the Money Advisor helps the individual develop a household budget. This enables the person to live in an affordable manner during and after the time the DAS is in effect.
Who Qualifies For A Debt Arrangement Scheme?
To be considered qualified for a DAS, the individual must be a resident of Scotland and have at least two unsecured debts that cannot be repaid under the original creditor agreements.
How The Debt Payment Program Works
The Debt Payment Program developed with the help of the Money Advisor is a legally binding debt management plan. The approved Money Adviser speaks with creditors on behalf of the individual, requesting that they agree to the DPP terms.
Creditors are given time to respond and those who do not are treated as if they had agreed and will be bound by the DPP. Lenders are usually required to approve the DPP before it can be finalized.
However, in some cases, an Accountant in Bankruptcy who serves as the DAS Administrator may approve the arrangement even after the lenders decline the Debt Payment Program. This is done in cases when it seems reasonable and fair to accept the arrangement.
Once the DAS has been approved, the Money Adviser appoints someone as the Payment Distributor. This individual accepts a single monthly payment from the debtor and allocates the agreed amount to each creditor based on the arrangements within the DPP.
As long as an individual continues to make payments under the Debt Arrangement Scheme DPP as agreed, he or she is protected from additional action by a creditor.
Creditors cannot petition for sequestration and only payments arranged through the DPP must be made. The DPP usually lasts until covered debts have been completely repaid. However, a change in circumstances can alter this general rule. The DPP could also end if another debt repayment option becomes more feasible.
Advantages To The Debt Arrangement Scheme
A DAS is designed for people who are struggling with debt and want to do something about it without writing off the debt balances. Individuals who know they can repay the debts in full but need more time than creditors initially provide can get the additional time they need through a DAS.
They pay only what they can afford, based on the money remaining after living expenses are paid. Interest and other charges are frozen under the DPP, preventing additional debt from accumulating.
An individual with a Debt Arrangement Scheme may continue residing in his or her home as long as rent or mortgage payments continue. This arrangement does not require any equity to be released from the property, as is the case with other types of debt solutions.
The home is also not at risk of being repossessed under this program. This aspect of the DAS is what makes it more appealing than some other debt solutions.
Disadvantages Of DAS
A Debt Arrangement Scheme is not without its downsides, which are clarified by the Money Adviser when exploring this option. Since repayments will not be made according to the original creditor agreements, the credit rating of the individual will be affected.
The details regarding the DPP are reported on the DAS register, which will affect the ability to obtain additional credit in the future.
Taking longer to repay existing debts means it will be a longer time before the individual is debt-free. While other debt solutions, like an Individual Voluntary Arrangement, have a specified timeframe, a DAS does not end until all debts have been repaid.
This can be frustrating for people who just want to move on with their lives. However, a DAS is generally a more attractive solution than more extreme measures because the negative effects are not as long lasting.
DAS Vs. Sequestration
In Scotland, bankruptcy is also referred to as sequestration and it is the alternative to a Debt Arrangement Scheme. Both help consumers manage debt. but each one is designed for a different situation, which makes it impossible to say whether one is better than the other. The true question is which debt solution is more appropriate for the individual.
People who have multiple unsecured debts that they can afford to repay over time generally prefer a DAS. Those who cannot afford to fully repay existing debts within a reasonable timeframe usually opt for sequestration.
Bankruptcy involves handing the estate over to a trustee who can sell some or all of the assets to cover repay debts and cover the bankruptcy. Any unsecured debts that remain at the conclusion of this process are written off by the trustee and creditors.
Any debt solution has consequences, and a debt advisor can explain these as well as the positive aspects of programs like the Debt Arrangement Scheme. With full knowledge of each option, Scottish residents will be able to make a well-informed debt management decision.
In many cases, any consequences will be worth the result of becoming debt-free.