Debt Arrangement Scheme (DAS)
What is a DAS?
The Debt Arrangement Scheme, set up by the Scottish Government, helps people repay their debt at a manageable amount over an agreed period.
How does a DAS work?
A DAS stops creditors taking action against you and freezes their interest and charges while you repay what you owe over an agreed period.
It’s the only debt management scheme in Scotland for repaying debts that is legally binding on your creditors, and stops interest and charges accruing.
Under the scheme, your budget is assessed, and one single monthly (or weekly) payment is agreed with you. This is paid into the Debt Payment Programme (DPP) and distributed to your creditors.
A key feature of a DAS, unlike an insolvency process, is it doesn’t take account of any assets you have, such as your car or home.
What is the process to get a DAS?
The first thing to do is to contact an Approved Money Advisor such as Wbg. We’ll discuss your personal circumstances with you to make sure a DAS is the most appropriate option for you.
The next step involves creating a realistic budget for you, and from the budget you will agree the amount of the single monthly (or weekly) payment that will be paid to your DPP for your creditors.
We’ll then submit the details of your DAS to your creditors, who will have a period of 21 days to object to it. If no creditors object to the proposed plan, then its details are submitted to the DAS Administrator (The Accountant in Bankruptcy is an office of the Scottish Government), and the DPP will automatically be given approved status.
If your creditors do object, then the DAS Administrator would consider whether your DPP is fair and reasonable, and if so, approve your DPP (regardless of any of your creditors objections).
What if my circumstances change?
If any of your circumstances change and this affects your ability to carry on with your DPP under its original terms, then we can put forward an appropriate amendment to the DPP to your creditors. Creditors have the opportunity to object to this, and as with the approval of the DPP initially, the DAS Administrator will consider whether or not your amended DPP is fair and reasonable, and if so, approve your DPP amendments.
If you miss payments during your DPP without prior approval of your money adviser, or you fail to continue to pay your ongoing liabilities (such as rent, council tax etc), then your DPP may be revoked. It’s essential therefore to speak with your money adviser if your circumstances change.
In certain conditions, crisis payment breaks can be granted without the need for creditor approval.
How much does a DAS cost?
There is no application fee for DAS.
Once approved, fees will be applied for the administration of your debt payment programme, but you will not be responsible for paying these on top of your debts. They will be deducted from the payments you make before your creditors are paid. The DAS Administrator fee is 2% and fees for the others involved in the programme is 20% of the sum due to be paid to your creditors. Therefore, if you complete the debt payment programme you will have paid your debt in full with your creditors receiving 78% of what they were owed and the remaining balance written off.
When a DAS may not be right for you
You must have sufficient disposable income to pay off your debts in full and must do this over a fair and reasonable time. If this cannot be achieved, then it may be appropriate to consider one of the other debt solutions offered by WB Debtcare. Your Approved Money Advisor will go over this with you.
Can I keep my home?
One of the big advantages of DAS over an insolvency process is that it does not take your assets into account. Therefore your property is not affected by DAS and this is often one of the main reasons why someone may choose DAS over an insolvency alternative.
Trust Deed
What is a Trust Deed?
A Trust Deed is a legally binding agreement with your creditors to repay all or some of the debt. This solution is based on what you can afford to pay, usually over 4 years. At the end of this period any remaining debt is written off.
How does a Trust Deed work?
A Trust Deed is a legal way to help you pay back some of all of your debts. You make regular payments to a trustee, based on what you can genuinely afford, and the trustee pays your creditors (the people you owe money too). Your trustee will help you work out how much you can afford to pay each month, taking into account your regular income and expenses.
A trust deed normally lasts 4 years, but it can be longer if you have valuable property or other assets.
How does a Trust Deed become Protected?
A notice of the trust deed is placed in the Register of Insolvencies, creditors are contacted and given five weeks to object to it.
If the majority of your creditors are satisfied with the terms of the Trust Deed, it will become Protected.
A Protected Trust Deed means it’s legally binding on all creditors and they can’t take action against you to recover the debt owed to them.
The process from signing the Trust Deed to registering as Protected usually takes about seven weeks.
What will happen to my home?
We understand you may worry about your home, and this will help determine whether a Trust Deed is the best solution for you.
The Trustee only has an interest in any equity in your home, and provided the circumstances are appropriate, this equity can be properly managed (for example by an extension to the Trust Deed duration, or by the exclusion of the home from the Trust Deed).
Our trusted experts will discuss and inform you of the options available to you.
What will happen to my car?
Most people are able to keep a vehicle, particularly where it’s needed for work, family commitments or essential day to day living. This will largely depend on whether your car is owned or subject to Hire Purchase and its value..
The key to a successful Trust Deed proposal is to get the right balance between your interest in retaining your car and the financial return to creditors. We structure our proposals with this in mind.
How are the trustee’s fees paid?
Your trustee will expect to be paid a fixed administration fee and an additional fee based on a percentage of funds collected during the Trust Deed for the work done in administering it.
Note that fees are deducted from the payments you make, and you will never be asked to pay anything over and above what you can genuinely afford. At first, more of your payment will go to fees, but over time, more will go to your creditors.
Your trustee will explain the fees to you before the trust deed starts and these fees do not affect what you must pay, or for how long.
Sequestration
What is Sequestration?
Sequestration is the Scottish term for Bankruptcy and can provide a fresh financial start for people who can no longer afford to repay their debts.
There are two types of sequestration in Scotland. Which is more appropriate for you depends upon your individual circumstances
The Minimal Asset Process (MAP) is a shortened form of sequestration for people with very limited income and few assets.
Full Administration Bankruptcy (FAB) may be appropriate when someone doesn’t meet the criteria for MAP.
What is the process for Sequestration?
Once you have successfully applied for your Sequestration, a Trustee will be appointed to deal with your estate. Your estate includes all debts and your assets (property and belongings).
Following your Sequestration, your creditors must deal directly with your trustee. Creditors are no longer allowed to take action against you to recover the debt.
Your trustee’s responsibility is to realise assets and determine if you can afford to make a contribution from your income for a period of four years. After the costs of the sequestration have been met, your trustee will divide up the monies gathered amongst your creditors, and your creditors must write off the remaining balance.
There isn’t a legal requirement as part of the Sequestration for your creditors to receive any payment, and sometimes they may not receive anything. If your estate doesn’t have sufficient funds to enable any payment to be made to your creditors, then they will legally have to write off all the debt owed to them.
How will my trustee deal with my assets (property and car)?
Your trustee doesn’t have to deal with your rented property, or your home if there is no equity (you owe more on the mortgage than the house is worth). Where there is equity in your property, it is only that equity that the trustee has an interest in.
Where there is an asset that the trustee must deal with, the asset does not necessarily have to be sold, although it can be. For example, a third party you propose (such as a family member, friend, or relative) may buy out the trustee’s interest in the asset. A buy-out may be by lump sum or instalments over an agreed repayment period. Assets which cannot be bought out would be sold. Note that this does not include your everyday possessions such as household items.
Our trusted specialists will guide you through how your assets will be dealt with before you commit to enter the Sequestration process.
How do I apply for Sequestration?
To apply for Sequestration you must first seek the advice of an approved money adviser or insolvency practitioner (IP). With the help of the money adviser or IP, you can then complete an application form and submitt it to the Accountant in Bankruptcy. If you choose to have a Trustee from Wbg deal with your Sequestration, we will assist with your application.
There is no application fee for MAP applications, whilst FAB applications required a £150 application fee to be paid. This can be waived if you receive certain benefits or an assessment shows you cannot afford it.
To apply for either type of bankruptcy, you must live in Scotland or have an established place of business in Scotland.
Why is it best to have a Wbg trustee deal with my sequestration?
You can appoint either the Accountant In Bankruptcy to act as your trustee, or a private licensed Insolvency Practitioner (such as Wbg’s Insolvency Practitioners).
Unlike nominating the Accountant in Bankruptcy, if you nominate one of our experts, you’ll be able to discuss your situation and any concerns with our specialists before making a final decision. This enables you to understand beforehand how much of a payment for four years will be expected from your income and agree how any assets you have will be dealt with.
We’ve been delivering debt solutions for over 30 years and undertake Sequestration administration on behalf of the Scottish Government. As a result, we’re best placed to make sure your Sequestration is conducted in line with the modern standard.
Wbg’s Insolvency Practitioners can act for you where you owe at least £5,000, and are in employment with scope for some surplus income, or have assets in your estate which could be realised for the benefit of your creditors.
I’m working, how much of my income will I have to pay, and for how long?
You will be assessed according to your own individual circumstances and by using the Common Financial Tool.
The aim of Sequestration is to provide debt relief – as such you will return to a better financial standing than the position you were in when paying back what you owe.
The payments you make from your income will be for up to four years.
If you’re unable to make any payments from your income and have no assets, then we will signpost you to a debt advice charity to assist with your Sequestration application.
What can’t I do during my Sequestration?
You may be discharged from your Sequestration after one year, and your Trustee will still be there to deal with your income payments for the four-year period. During that one year prior to your discharge, there are certain restrictions on you. These are some of the main ones:
- You are limited to what further credit you can take on.
- You may not act as a Director of a limited company.
- You may not take on certain public offices.
For a period of four years from the date of the award of sequestration, if you acquire any assets (e.g. an inheritance or lottery win) then these must be paid to your Trustee for the benefit of your creditors.
How much does a Sequestration cost?
The costs of administering your bankruptcy will be met from funds accumulated from the sale of your assets and the contributions you make from your income. These include the fees and costs of the trustee and will be paid before any payments are made to your creditors. The fees are charged on a time on-line basis and will be audited by the Accountant in Bankruptcy and approved by creditors.
As outlined above, in certain circumstances there is an application fee of £150 to be paid, which can be waived if you are in receipt of certain benefits or assessed as unable to afford it.