A Guide to Debt Arrangement Schemes

Jane Wardle

Written by Jane Wardle on December 10, 2018

Updated June 10, 2019

Couple making a debt arrangement scheme

Financial trouble is a particularly difficult situation to find yourself in and getting out of it can be an endless process unless you approach your debt from the right viewpoint. There are so many different options out there if you find your finances spiralling out of control but choosing the right one for your circumstances is exceptionally important.

Getting in touch with a free financial advisor can help you understand how you ought to be tackling your debts. One option available to you is a Debt Arrangement Scheme, which will be explored further here.

What is a debt arrangement scheme?

Debt arrangement schemes explained

A debt arrangement scheme, or a DAS, is a reasonable, statutory debt management plan available to people who find themselves in serious financial jeopardy. The scheme, which is government backed, is one that has been designed to help people in financial difficulty repay their debts in a more approachable and manageable way.

A debt arrangement scheme ensures that individuals are able to put themselves back on track towards a better financial position. Unlike is the case in sequestration or bankruptcy, debts are not written off in exchange for assets. A plan is put in place that outlines how and when the persons’ debts will be paid back. Debts are paid back entirely over a set period of time and is a fantastic option for those who are unable, or unwilling, to use the value of their assets to cover their debt.

Entering into a DAS can be useful because it allows you to tackle your debt problems before they become uncontrollable. While having a DAS might give the impression of financial difficulty, it shows that as a person you are willing to address your issues in a positive and proactive manner.

A DAS ensures that any extra interest or fees that would normally hit your balance are revoked- the amount you pay back each month is a standard amount and will not change throughout the duration of your Debt Arrangement Scheme.

How could a debt arrangement scheme help me out?

DAS schemes are predominantly directed at people who have a regular, consistent income. If you have the financial means to pay your debts but are feeling overwhelmed by them, then a DAS may well be for you. Debt arrangement schemes help customers by giving them more time to pay off their debts- the debt is still just that and needs to be repaid in full.

Debt Arrangement schemes are perfect for those people who know they will be able to pay their debts off eventually, but don’t have the disposable income to do so right this second. The scheme lengthens the amount of time people have to repay their debts. This gives individuals more breathing space and less stress.

If you know that you’ll never be in a position to fully pay off your debts, then it may well be worth looking into sequestration or trust deeds as they will be more suited to your needs.

How does a DAS actually work?

Debtors and creditors must firstly collaborate to put together something called a DPP – a Debt Payment Plan and establish exactly what is owed to who. Your DAS approved advisor will then scrutinise your earnings, your outgoings and your monthly living costs to be able to conclude what you can afford to pay each month as a means of repaying your dues.

Once this plan has been put together in principle, the debtor will be allocated a single figure amount which they will pay each month as a lump sum. This money will be paid as agreed and passed on to creditors through the designated Payments Distributor.

Assuming that you keep up with your repayments each month, your creditors will no longer be able to add charges, interest or taxes to your repayment amount. This amount will be the same throughout the entirety of your repayment plan. Once you have paid back the full established amount, then you will be released from the terms of the DAS.

Failing to make a payment when you are enrolled in a Debt Arrangement Scheme can be a serious issue. If you find your circumstances to have changed, getting in touch with your advisor may well help you, as you could find that you are eligible to apply for a variation in the scheme.

If you miss payments throughout the duration of your DAS, then this is grounds for revocation of the scheme. The people you borrowed from will return to charging fees and interest on top of the money you already owe which, naturally, can lead to serious financial ramifications.

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