Update on Debt Arrangement Schemes in Scotland
Figures recently released by the Accountant in Bankruptcy show that the Scottish Government’s debt management tool, the Debt Arrangement Scheme (DAS), continues to be an attractive option for Scots suffering with debts as numbers for the Scheme have increased by nearly 30 per cent from the same period in the previous year. We therefore felt it was an appropriate time to re-iterate our advice to Lenders in this situation.
Background DAS was first introduced in November 2004 but fell short of the expectations hoped for by the Government, and whilst the number of people taking part in the Scheme increased year by year, the numbers were still below what the Government had expected. A number of changes to DAS were introduced by the Debt Arrangement Scheme (Scotland) Regulations 2011 which may have contributed to the increased uptake. The changes included the following:
• Allows for a wider range of advisers being approved to provide advice to debtors;
• Allows joint entry into the Scheme by couples;
• Allows payment holidays of up to six months if the debtor experiences a short term income issue.
Who can apply? The debtor can apply for a DAS if they have one or more debts and are having difficulty keeping up repayments. They require sufficient income to meet normal payments and to make a payment to arrears.
Can a creditor object to the Scheme? Creditors have 21 days to respond to the payment plan offer, however even if a creditor objects the plan may still go ahead.
Mortgage arrears Mortgage arrears are covered by DAS but the debtor must still be able to meet their normal contractual monthly payment. The Debtor cannot include their contractual payment in the payment plan. If the debtor falls behind on their contractual payment then the Lender can progress repossession proceedings. Arrears will be frozen at the date DAS is established and interest cannot continue to accrue on the arrears when they become part of the Scheme.
What should Lenders do?
A DAS is similar to an Individual Voluntary Arrangement (IVA) and the Lenders IVA personnel would be the best suited to deal with such applications. The team must be aware of the time limits and if objecting to the application they must fully specify the reasons why and appreciate that despite the objection the Scheme may still be approved.
Dalene Whelan, Solicitor
Ascent Legal Scotland
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