Following the Bank of England’s warning that consumer borrowing over the last year has been soaring, and lenders face action for irresponsible lending, there is a growing risk of a tsunami of consumer indebtedness once again sweeping across the UK. Unsustainable debt causes major problems and misery for individuals and their families, and is a costly burden to society.
Everyone is better off if bankruptcy can be avoided. We consider an effective debt management solution – the Debt Arrangement Scheme (DAS) – that could provide help to many more people looking to find a way out of their debt problems.
The Debt Arrangement Scheme, which is implemented via a Debt Repayment Programme, may be the answer for those who aren’t necessarily insolvent but who need some breathing space when it comes to their debts.
DAS is a statutory, government backed scheme which if approved, protects debtors from their creditors by taking action for recovery of the debt, whilst also freezing interest and charges. It affords those in debt a reasonable period to repay their debts back in full.
In some cases, those who are unable to meet their monthly contractual obligations jump feet first into insolvency, just to get the creditors off their back, stop the constant phone calls and sometimes, the astronomical interest that is applied. Consumers get trapped in a debt cycle, paying minimum payments that often only cover the interest on the loan. This is never a good move.
Any debt advisor knows that they must provide anyone who approaches them with the best advice for their individual circumstances and in some cases, insolvency is not always the most appropriate.
DAS is a statutory repayment programme therefore assets are not considered, so property and other assets, such as a car or furniture, are protected. Campbell Dallas always ensures that each person who approaches us for advice is aware of ALL their options and given the information they require in order to make an informed choice.
DAS is recognised as a statutory scheme across Scotland, and most of the larger creditors such as banks, HMRC and councils have dedicated teams who deal with those customers taking part in the scheme.
Most people have heard of bankruptcy however in most cases, those in debt decide to struggle on, fearing insolvency is their only other option. They worry about losing their home or their jobs, and are unaware of DAS because it is never explained to them.
There are 2 types of DAS products available, DAS and Business DAS.
An individual DAS helps individuals, couples, sole traders and the self-employed whereas Business DAS helps partnerships, trusts or unincorporated bodies.
How does it work?
- You must seek money advice from a DAS approved money advisor, like ourselves.
- Your surplus income is worked out using the Common Financial Tool, which is used to assess household income and expenditure across all statutory debt solutions in Scotland.
- Your creditors are given time to consider the proposal.
- Interest and charges are frozen as long as the programme is approved.
- You pay what you can reasonably afford to a Payment Distributor each month and they pay it to your creditors on a pro rata basis.
- Your plan will last until all creditors have been paid in full, however this must be within a reasonable timescale, usually no more than 5 years for Business DAS and 10 years for DAS.
Nicola Standen is a Manager and adviser in the Personal Debt team at Campbell Dallas. She can be contacted at: firstname.lastname@example.org
For more information on personal debt solutions provided by Campbell Dallas go to www.dontfretaboutdebt.net
The information in this blog should not be regarded as financial advice. This is based on our understanding in September 2017. Laws and tax rules may change.