Debt Arrangement Scheme:
Is it right for you ?
A Debt Arrangement Scheme is a debt payment program that will help you repay off your debts at a rate that is affordable for you.
What is a DAS?
A Debt Arrangement Scheme or DAS is a type of statutory management plan for managing your debts. The debt arrangement scheme allows you to apply for the Debt Payment Program DPP, which is based on the concepts of instalments.
The DPP allows you to arrange your payments in terms of instalments that offers effective payment of your debts in an organized manner.
| Potential benefits of DPP | Potential Risks of DPP |
|---|---|
| • The DPP allows you to organize your payments in terms of instalments. | • The program consumes 10% of your monthly payments in terms of monthly fee for running your finances. |
| • The DPP allows nullifying of the applicable interest rate on your debts. | • The DPP record will be displayed on your credit profile for 6 years, which can affect your reputation. |
| •With the fluctuation in your financials, you can alter your plan as well as opt for a different repayment period. | •With the fluctuation in your financials, you can alter your plan as well as opt for a different repayment period |
| • With the completion of DPP, your debts are written off. | • In case you are unable to keep up with the payments, your DPP can fail, resulting in creditors taking further action against you. |
| • Effective payment of the debts with affordable rates, giving the freedom of managing the financials | • |
How does a Debt Arrangement Scheme Work?
The Debt Arrangement Scheme offers a flexible repayment method, which can be used for managing your debts as well as making efficient payment planning.
1.1 Consulting a money advisor:
The initial step for applying for the Debt Arrangement Scheme is consulting a money advisor. Instead of trying to understand the financial process on your own, it is better to consult an money advisor. The money advisor will have in-depth information regarding the financial metric and will inform you of all details that will need to be consolidated.
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1.2 Assessment of your Budget:
The next step is a consolidated assessment of your initial budget. This includes the assessment of your initial budget including your current income stream, currently owned assets, current expenses, total debts to be paid and other financial information.
In addition, your advisor will nominate your potential savings. Remember to exclude the debt repayments in this assessment, as it will lead to nullifying of your income. Removal of the debt repayments will inform you of your surplus income.
1.3 Formation of the DPP Plan:
Once your advisor has consolidated the information of your income streams, expenses, and payable debts, they will guide you towards the formation of an effective Debt Payment Plan. This includes setting aside the necessary income for emergency and normal consumption, forming a payment plan and considering future income streams for better assessment of the instalments.
After the plan is ready, your money advisor will contact your creditors with the proposal. Your creditors will have 21 days for approving or rejecting the proposal. In case your creditors do not respond, it is expected that your creditors have accepted your proposal in terms of the fair and reasonable agreement.
1.4 Initialization of DPP:
After the approval of the program by your creditors in terms of objections on its fairness, the program will be sent to the Debt Arrangement Scheme Administer for further approval. Once the interest fee is paid, the applicable interest rates on your accounts will be frozen.
With the initialization of the DPP, your name will be entered in the Debt Arrangement Scheme register. The payments will be sent to your creditors as per decided in the plan. In case your creditors try to contact you, you can contact your money advisor to deal with them.
1.5 The end of the program
At the last payment, your payment distributor will officially sign you off and you will be relieved of the debts on your income. The payment of the debts will be paid interest-free to the creditors. You can even plan for new investments keeping the idea of your financials.
Use DAS to start off a debt payment program
Debt Arrangement Scheme lets you repay your debts by making one affordable monthly payment.
The payment is based on the amount of money you have left over each month once you have paid off all your household bills rather than your creditors asking you for the amount. During a DPP your creditors are not allowed to increase your debts and should not contact you via telephone, email or face to face.
Things to think about the DPP
Deciding to start a DPP is a big step and there are things you should consider before you apply. There are the following:- You must have enough income left over every month after your living costs and be able to pay off your debts over a valid period of time.
- If you are expecting to receive a lump sum of money in the next 12 months, i.e: house sale income or the money that your family has given to you, then you are required to contact your account manager to arrange a review.
- DPP will fail if you struggle to keep your payments up to date. Creditors will add interest and charges to the amounts that you owe, and they will take legal action against you if you cannot pay off your debts.
- If you are finding it hard to maintain your payments, don't hesitate to ask for help. Your account manager will then review and vary your payments potentially to your creditors.
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