What’s new in the Debt Arrangement Scheme?
The Debt Arrangement Scheme, commonly referred to as DAS, is a Scottish Government debt management tool. This allows a debtor to repay their debts through a Debt Payment Programme. It provides someone in debt with breathing space by stopping creditors taking action, freezing interest and charges. This means that individuals can repay their debts in full over an extended period of time without becoming insolvent.
Following a review, the Accountant in Bankruptcy has made a number of changes to the DAS with a view to, among other changes, offering increasing access and flexibility. Amendment to the DAS regulations come into force on 29 October 2018.
Margaret Linn, Manager in our Business Recovery and Insolvency team, provides an overview of changes.
So, what’s new?
- Whilst the debtor’s income and expenditure must still be assessed, using the Common Financial Tool, they are no longer required to pay their full surplus income if they choose not to. In general, the total surplus income of debtors entering bankruptcy, or a Trust Deed is expected to be contributed towards their estate for 48 months. In the DAS it was for the full term which could be considerably longer. This now means that, providing creditors agree, the debtor does not have to contribute all surplus income, taking the pressure of household finances particularly for those in long term debt payment programmes.
- In line with sequestrations, debtors can incur up to £2,000 of debt without seeking approval from the Debt Administrator. Whether it is replacing a boiler or repairs to a car, this gives the debtor much more flexibility to get on with their lives, rather than having to apply then wait for approval to seek funding for what are often essentials.
- Rent and mortgage arrears, for the sole or main residence, can now be omitted. This reduces the potential for eviction.
- The debtor can now include the sale or re-mortgage of their property as a discretionary condition. If the debtor is asset rich but cash poor and is willing to sell or re-mortgage to pay their debts, they can enter a DAS with the condition that the property will be sold or re-financed within a specified period. The DAS freezes interest and charges and the debt is managed whilst giving the debtor time to make the necessary arrangements without creditors taking further action.
- The DAS register is being brought in line with the Register of Insolvencies, in that the address of vulnerable debtors can now be withheld. This will give access to DAS to debtor’s who had legitimate reasons to fear having their whereabouts published in a public forum.
- In Business DAS there is now provision for setting it up for a single debt. This is self-explanatory. Previously if a viable business was unable to meet a single debt, relief was not available though DAS. Now an offer can be made which ensures the creditor gets paid and the business survives the event that caused the issue.
- There is now the provision for a payment break in Business DAS, providing it does not extend the term beyond 60 months. This means that if a debtor suffers cash flow problems out with their control and cannot make their DAS payments for a few months, the DAS is no longer automatically revoked. This change allows the flexibility to deal with unforeseen events whilst still ensuring creditors are paid within 60 months.
These are only some of the changes introduced. They are debtor friendly and should make DAS easier to sustain, ultimately benefitting creditors. If you would like further details on the Debt Arrangement Scheme, contact a member of our Business Recovery and Insolvency Department on 01382 200055 or firstname.lastname@example.org
The full changes are detailed in The Debt Arrangement Scheme (Scotland) Amendment Regulations 2018.
Henderson Loggie CA is an appointed representative of First Step Debt Advice Limited, which is authorised and regulated under the Financial Conduct Authority.