Alongside Is A Trust Deed A Good Idea, many people ask Trust Deed Scotland® the question of Is A DAS worth it?
However, it’s not always simply a case of looking at it as a DAS vs Trust Deeds argument as there are other options which may be beneficial for someone in financial difficulties such as Minimal Asset Process; a form of bankruptcy in Scotland aimed at individuals with no or little assets and without an income.
Or Full Administration Sequestration, another form of Scottish bankruptcy which is very similar to the Minimal Asset Process.
There still remains the option of clearing debts using a debt consolidation loan, for example, typically secured against a person’s home.
In some cases where a debt isn’t yet unmanageable, traditional forms of lending can be used to consolidate debt under a new credit facility. This is typically unlikely if you’ve already been refused credit due to poor or bad credit history, with a history of missed payments and default notices.
Quite often an individual may be eligible for a DAS and a Trust Deed and it will come down to the person who has the debt to then make an informed decision on which solution they want to pursue, knowing any the key facts and hopefully, taking that decision after they have been given balanced and qualified advice.
DAS or Trust Deed? What is the best option?
There are many similarities between the plans, but which one is best for you will depend upon your individual circumstances.
Trust Deeds – How They Work
Trust Deeds are legally binding solutions for people who are struggling with problem debt.
Once you’re in a Trust Deed, you will make a single monthly contribution towards your debts, based on what you can afford after essential living costs have been met.
At the end of the Trust Deed term, any remaining unaffordable debt will be written off, giving you a fresh financial start.
DAS – How They Work
The Debt Arrangement Scheme is a government scheme designed to help people struggling with unmanageable debt.
Under DAS legislation, you will begin a Debt Payment Programme (DPP), tailored to your individual circumstances.
In the DPP, you will make a single payment towards your debts each month, based on what you can afford.
Any interest, fees, or charges on your debt will be frozen to make clearing your debts easier with the DAS, and you will be afforded legal protection from creditors.
Trust Deeds – Length
Trust Deeds usually last for four years, but can sometimes last for five depending on the specifics of the case.
DAS – Length
The length of your DPP depends upon how much debt you have, and how much you can afford to pay towards it each month.
An individual’s Debt Payment Programme will not usually last longer than 10 years under the Debt Arrangement Scheme. A Small Business DAS, would not last any longer than 5 years typically.
Trust Deeds – Debt Amount
To be eligible for Trust Deeds you would have £5,000 or more of unaffordable, unsecured debt, owed to at least two creditors. A creditor is anyone you owe money too, in an unsecured arrangement. E.g. credit cards, bank loans and catalogues. You would be resident in Scotland, and be able to afford a monthly contribution towards your debts.
The Scottish government reported that in 2019, the average debt amount for Trust Deeds was £15,200 – up slightly from 2018 when it was reported as £14,800.
While this is a typical average debt amount for Trust Deeds, bear in mind that Trust Deeds can be used on debts of over £30,000 – it isn’t the only rule that determines your suitability.
DAS – Debt Amount
To be eligible for the DAS, again you must be a resident of Scotland, have one or more debts, and be struggling with your current debt repayments.
You would typically have a reasonable amount of disposable income to put towards a DPP. There is no set minimum amount of debt which you need to be eligible for the Debt Arrangement Scheme.
The Scottish government reported that in 2019, the average debt amount for DAS was £17,200 – again up slightly from 2018 when it was reported as £16,500.
While this is a typical average debt amount for DAS, bear in mind that like Trust Deeds, DAS can also be used on debts of over £30,000 and therefore it isn’t the only rule that determines your suitability here either.
Trust Deeds – Pros and Cons
When you’re weighing up an answer to the question of Is A DAS worth it, the pros and cons of DAS vs Trust Deeds are a great starting point.
The important thing to remember is that it will come down to your own circumstances and what’s best for you depending on what you can afford to repay each month, your assets and really what you want to achieve from it at the end, as obvious as that may seem.
Whether you qualify for a DAS, a Trust Deed, an alternative, or all of the above; it’s essential that you get balanced debt advice from a qualified debt advisor and that the advice is given to.
Trust Deed Scotland® also provide a personalised illustration and our advice team will explain the pros and cons of any solutions and what they mean to you.
There are unfortunately some debt advice company firms operating without the correct FCA regulation approval. Or that may try and force you into a solution without explaining the differences.
Trust Deed Scotland® have earned thousands of 5-star reviews, as a result of our ongoing commitments to training and compliance, and a desire to put our clients’ best interests at the forefront of our service.
Trust Deeds – Pros
Once Trust Deeds become protected, your creditors can no longer take legal action against you and this means, as long as you keep up repayments during the Trust Deed, you cannot be Sequestrated (made bankrupt in Scotland).
Your lenders are also prevented from contacting you to chase you for payment, putting an end to the hassle of persistent telephone calls and letters from the people you owe money to, which can make having unaffordable debt so stressful.
Another strong aspect in the favour of Trust Deeds is that a significant amount of your unaffordable debt is written off, allowing you to become debt-free in a relatively short period of 4 years.
Trust Deeds – Cons
The main disadvantage of a Trust Deed is that it will have a negative impact on your credit score, which can take some time to rebuild.
This means accessing further credit once your plan has ended can be challenging.
Another disadvantage is that, if you are a homeowner, you may be expected to release equity to put towards the Trust Deed.
Although Trust Deeds do allow for some flexibility if you do not keep up with your payments you run the risk of the plan failing, and could face Sequestration (Scottish equivalent of Bankruptcy).
DAS – Pros and Cons
Now, when considering if a DAS is worth it, or whether a Trust Deed is a good idea, it is necessary to then evaluate the pros and cons of DAS.
Debt Arrangement Scheme – Pros
Like Trust Deeds, the Debt Arrangement Scheme is legally binding, meaning that during your DPP term, creditors can no longer harass you for payment or take legal action against you.
You will also make a smaller monthly contribution to your debts, making it easier to meet your essential living costs and pay the bills that matter most.
All of your assets including any equity you might have in your home or other property are entirely protected.
Lastly, the main advantage which a DPP has over an informal debt management solution is that all interest and charges on your debts are frozen.
Debt Arrangement Scheme – Cons
As with Trust Deeds, and any formal debt solution, entering into a DPP will have a negative impact on your credit rating, making it more difficult to access credit in the future.
If you do not keep up with your DPP payments, it could be revoked, leaving your creditors free to take legal action against you and resume charging interest and fees on your debt.
Lastly, unlike Trust Deeds, none of your unaffordable debts is written off under the terms of your Debt Payment Programme.
This ultimately means that repaying your debts may take longer than in a Trust Deed, and potentially make it a more expensive process.
Find out more about the advantages and disadvantages of the Debt Arrangement Scheme.
DAS vs Trust Deeds – Joint or Single Application?
Trust Deed Scotland® are also asked about the opportunity for two persons to do a joint DAS or a joint Trust Deed.
It’s possible for a couple, married or otherwise, to apply for a joint Debt Arrangement Scheme however it’s not strictly possible to have a joint Trust Deed. BUT…It is more than reasonable for both parties to have individual Trust Deeds – a situation that arises in many residences across Scotland where the household have amassed unaffordable debts.
The key is to ensure that you do get the correct debt advice, and you can trust us that we’re in the best position to offer you that advice, as the No.1 rated debt advice company in Scotland; as per our independent Trustpilot debt advice reviews.
DAS vs Trust Deeds – Where to Get Expert Advice
As a final thought – whether you want to understand whether a Trust Deed is a good idea, or is a DAS worth it; we would always advise that you seek expert advice which can be tailored to your situation and your circumstances.
You can get this advice from a licensed debt charity, or you can get expert advice, right now from DAS Scotland by calling us on 0141 241 6299.. you can contact us, or try out our debt repayment calculator tool.