Alternatives To Sequestration

Bankruptcy has always been a last resort for debt problems and there may be other options available to you.

Debt Arrangement Scheme

This is the official name given to a formal arrangement between a debtor and their creditors to pay multiple debts over an extended period of time. Basically, you are being given more time to pay back the money you owe.

Unlike the Debt Management Programme, the Debt Arrangement Scheme is a formal arrangement.

This means that you are not only given extra time to pay your debts, but that any interest, fees and charges owed on debts are frozen from the date the Debt Arrangement Scheme is approved. Debts will be written off if the programme is completed.

Providing payments are then made as agreed, a Debt Arrangement Scheme protects your assets, including your home (as long as you continue to make your mortgage payments).

To qualify for a Debt Arrangement Scheme you need to have more than one debt. If you owe the same creditor two different debts - two years arrears of council tax for example - that would count as more than one debt.

A Debt Arrangement Scheme will involve you making regular payments to your creditors as set out in a Debt Payment Programme (DPP).

The Debt Payment Programme allows you to pay off your debts over an extended period of time and can be for any amount of money and for any reasonable length of time.

If creditors all agree to these payment terms or are deemed to have agreed because they do not respond, the Debt Payment Programme is agreed automatically. Creditors will then be bound by this DPP as long as you keep to the agreement.

If creditors do not agree to the revised payment terms, then your Debt Arrangement Scheme administrator can still approve the debt payment programme if it is fair and reasonable to do so.

If a debt is included in a Debt Arrangement Scheme and you are making payments as agreed, your creditors cannot carry out enforcement action against you or make you bankrupt.

Similarly, creditors are unable to take enforcement action against you if you have intimated to an intention to apply for a debt payment programme or have an application awaiting approval.

If your circumstances change, the programme can be varied to take account of this (if all creditors agree or if the DAS administrator decides it is fair and reasonable).

Please note that if you currently have a trust deed or a protected trust deed in place or are you sequestrated, bankrupt or subject to a Bankruptcy Restrictions Order, then you probably won't qualify for a Debt Arrangement Scheme.