Debt Arrangement Schemes (DASs) are financial agreements that allow you to make lower and more affordable monthly repayments over a considerable period of time.
They can be used to clear unsecured debt as well as other outstanding amounts such as mortgage and rent arrears.
The arrangement follows a Debt Payment Programme (DPP) that is set up and administered by an approved financial adviser who provides debt management services.
This Debt Arrangement Scheme is government-based and is primarily designed for people who have difficulty meeting their financial commitments for various reasons and unavoidable circumstances.
The proposed DPP is sent out to creditors who then have up to 21 days to analyse and review it.
Once the creditors accept the proposal, the DPP takes effect immediately.
Payments made through a DPP can last for a maximum of 120 monthly payments.
Under this programme, you will pay a regular amount that is affordable for you after all your basic household necessities and expenditures have been taken from your current income.
Your monthly payments will be sent to your creditors and will automatically be deducted from your outstanding balances.
While under this arrangement, your creditors cannot take any further action against you or your property.
Furthermore, interest charges and any additional fees that your creditors may impose against your liabilities will be stopped.
Aside from these advantages, this programme saves you from the hassle of receiving numerous letters and phone calls relating to money you owe plus accumulated interest.
This type of payment scheme is suitable for you if you still have sufficient money left to pay your outstanding balances after meeting your household bills and other necessities.
This scheme is also appropriate if you owe money to more than one creditor.
Another point to think about is that a DAS will affect your credit rating, and it may take a while before you can qualify for another loan or obtain a mortgage.
Under this arrangement, you are allowed to make repayments for a considerable period of time which means that it will also take longer for you to be considered debt free.
In addition, setting up a DPP will incur administrative costs, which will be taken from your initial monthly payment.
On the plus side, a DPP is quite a flexible arrangement.
It will enable you to apply for an alternative payment arrangement if your financial circumstances change.
If this change in circumstances affects your ability to meet the monthly repayments you can arrange to make reduced payments according to how much you can afford to pay.
Your finances could change for a number of reasons, which can greatly affect your level of disposable income and therefore impact your ability to meet the payments under the DPP.
Typical situations that will be taken into account, when considering whether to reduce payments,include unemployment, illness or incapacity to perform your tasks, and a family crisis such as separation or divorce.
To be considered thoroughly debt free, you will need to be able to make all the payments agreed in your DPP.
However, if you have a sum of money available, such as an inheritance, this can be used towards repayment of the outstanding amounts.
In this scenario you will be able to clear the overdue amounts in a shorter period of time.