08 Sep 2011
Kirsty Allen, Solicitor, looks at he impact of the the recently introduced Debt Arrangement Scheme (Scotland) Regulations 2011.
Kirsty Allen, Solicitor, looks at the impact of the the recently introduced Debt Arrangement Scheme (Scotland) Regulations 2011.
The new Debt Arrangement Scheme (Scotland) Regulations 2011 came into force on 1st July 2011.
The Debt Arrangement Scheme (DAS) is unique to Scotland and has been operating since 2004. DAS differs from the Statutory bankruptcy procedure as it is a more informal scheme administered by the Accountant in bankruptcy (AiB) that helps borrowers pay back money owed to lenders over an extended period of time.
Debt Payment Programmes (DPPs) approved under DAS allow borrowers to repay their debts in full and can last for any reasonable length of time depending on the value of debt due and the amount of disposable income the borrowers have.
Once in place, a DPP will ensure that lenders receive regular payments from the borrower. A DPP freezes interest and charges, and also prevents lenders from taking action, e.g. raising court proceedings.
Key Changes to the DAS Scheme as a result of the Regulations:
How do the changes affect lenders?
A borrower can apply for a DAS if they are in mortgage arrears. However a DPP programme will only be considered suitable if regular mortgage payments are continually paid. Due to the fact that only the arrears are covered by the DAS, if regular mortgage payments are not made lenders can still raise an action in court to repossess a property.
The current economic climate has resulted in the number of DPPs applied for since they were introduced increasing considerably. In the financial year 2004/5 only one DPP was applied for. This increased to over fourteen hundred in the financial year 2009/10.
It is now more important than ever that lenders are aware of the newly revised Debt Arrangement Scheme as the uptake of the scheme will only increase with time and appears to be the Scottish Government’s preferred way for those who have become overwhelmed by their financial obligations to address them.