FROM next Monday, Scotland’s statutory debt arrangement scheme (DAS) will be relaxed. For those struggling with unmanageable debt because of the pandemic it will now be possible to make minimum or token payments through DAS.

The new procedure is called the “low and grow debt payment plan” and it’s designed to run over six months or so. For many, this will provide a vital breathing space and a powerful opportunity to take control of household finances.

The first few months of the New Year is traditionally a time of financial hangovers as bills, loans and overspending crystallise.

It’s not unusual to put the cost of Christmas on credit cards or use buy now, pay later loans to purchase expensive tech or designer gear for children. Credit is a handy tool to spread the cost; but if household income drops, payments become unaffordable. If you’ve no savings, what goes up must come down.

When a person repays financial liabilities through DAS all interest and contractual charges are frozen. DAS lifts wage arrestments; stops court action including bankruptcy and requires one monthly payment that’s distributed to all creditors on your behalf.

DAS allows greater flexibility on how and when monies can be repaid. For lenders the benefit is receiving more money than they would ever achieve if a person entered into a protected trust deed or bankruptcy.

The thinking behind the low and grow debt rules originated last year when the Money Advice Trust called on the UK government to review all debt options given the economic impact of Covid-19 on personal finance.

As debt law is generally devolved to the Scottish Parliament, it became apparent Scotland’s DAS was flexible enough to introduce and expedite a low and grow approach. The Scottish scheme is administered by the Accountant in Bankruptcy (AiB).

The AiB suggest minimum payments in a low and grow scheme of 5% of the full amount owed over six months or £35 per month; whichever is lower. It may be possible for payments to be less or even nothing for six months.

The AiB’s guidance explains how its rule changes will help those who need extra time to get back on track because of the economic impact of the pandemic. It won’t be suitable for everyone.

If you don’t own any assets - like a house - and have no realistic prospect of increasing income in the foreseeable future the best solution may be to become bankrupt and write-off all debts. This can be done through the “minimum asset process”. There’s no point making token payments indefinitely if you’re on the breadline with no assets to lose.

The AiB give common scenarios where new rules will make a difference. An employee working in the hospitality sector with a long-established working pattern, but their income has been affected by Covid-19. Their employer expects to reopen or increase hours later in 2021, and the employee wants to repay debts and avoid bankruptcy.

For those working in retail, income has been variable over the last few months with shops closing sporadically and hours fluctuating with varying opening times. Many retailers intend to reopen fully in 2021 so the low and grow scheme can provide essential respite for workers until then.

For those with a property they’ve decided to sell, the low and grow process can provide a breathing space if it takes longer than usual to sell. When the property does eventually sell, debts can be repaid in full.

Alan McIntosh is a money advisor who runs the website. I asked him how the new rules would work in practice: “People will have a condition placed on their scheme that they undertake to increase payments within 6 months, to a level that will allow debts to repaid within a reasonable period of time. That’s considered to be anything up to 10 years”.

“So, no-one will have to stand by helplessly and watch the amount they owe to banks and credit card companies increase. A low and grow DAS freezes the balances on debts, in the hope that within 6 months, people will get back into work so they can increase the amount they’re paying back. It goes further than what many UK banks have been offering with payment breaks, which still sees interest and charges added and the amount people owe increasing”.

“The test will be in the DAS decisions made if lenders reject proposals. The AiB can overturn those objections and decide to approve programmes, protecting consumers, or they can favour the interests of the banks, credit card and payday lending firms”.

You can find a free debt advisor in Glasgow here: Or contact Govan Law Centre for free debt advice on 0800 043 0306.