The difference shows up when a creditor decides it has waited long enough. One arrangement has the force of law behind it and the other relies on goodwill.

That distinction matters more in Scotland than elsewhere, because much of the debt advice online is written for England and Wales. How the Debt Arrangement Scheme works covers the Scottish scheme.

One is a statutory scheme and the other is an informal agreement. The Accountant in Bankruptcy classes debt management plans among informal debt solutions, which it describes as not legally binding options to repay debt.

Side by side

That classification is on the Accountant in Bankruptcy’s own page for people in debt, and its statistics releases say informal plans are not included in them.

What informal means for you

It means you are not tied in. StepChange says you make no legal commitment to a plan and can stop it at any time.

That flexibility is real and it is the genuine advantage. It is the same feature as the lack of protection, seen from the other side.

What informal means for a creditor

It means nothing compels them. National Debtline’s Scottish guide to clearing debt says a debt management plan cannot force creditors to accept offers and that creditors may still take court action against you.

No. StepChange puts it plainly: a debt management plan is not based on government legislation, so it does not protect you from legal action by your creditors.

What the statutory route stops

Once a programme is approved, section 4 of the Debt Arrangement and Attachment (Scotland) Act 2002 makes it incompetent to serve a charge for payment, to commence or execute diligence for the debts in it, or to found on one of them in petitioning for your sequestration.

Approval recalls any arrestment of your income or property, and notice of the recall goes to the employer or to whoever is holding the arrested funds.

Where each stands, power by power

StepChange’s own comparison says the same thing from the other direction: under a plan, creditors retain rights to pursue court action, and under the scheme you are protected from it.

The timing point, and the statutory moratorium

The recall itself runs from approval of the programme, under regulation 33(1)(a). Protection starts earlier than most pages suggest.

From the moment your application is entered in the DAS Register, regulation 30(1)(ba) makes it incompetent to commence or execute any diligence to enforce payment of a debt. That limb was inserted with effect from 27 June 2015.

Unlike the statutory moratorium, that regulation carries no exception for an earnings arrestment already running. Ask your adviser to raise it with your employer’s payroll.

A statutory moratorium lasts six months. The period was six weeks until section 23(2) of the Coronavirus (Recovery and Reform) (Scotland) Act 2022 substituted six months in section 198 of the Bankruptcy (Scotland) Act 2016, with effect from 1 October 2022.

In a Debt Payment Programme they stop being owed, automatically. In a debt management plan nothing requires a creditor to freeze anything.

The statutory freeze

It comes from the Debt Arrangement Scheme (Interest, Fees, Penalties and Other Charges) (Scotland) Regulations 2011, and it applies to the debts in an approved programme without anyone having to agree to it.

Whether a Debt Arrangement Scheme freezes interest and charges sets out what is covered and from when.

The position on a plan

National Debtline is direct about it: creditors do not have to freeze interest under a debt management plan. Providers describe most creditors as agreeing, and there is no published figure for it.

What the rules do require is forbearance. The Financial Conduct Authority’s rules on customers in arrears require firms to treat customers in or approaching arrears with forbearance and due consideration.

There is a narrower requirement inside that guidance. Where a repayment arrangement is agreed and the customer is keeping to it, further interest and charges must be reduced, waived or cancelled to the extent needed to stop the debt rising.

That is a rule about the debt not growing rather than a freeze, and it bites only once an arrangement is agreed and being kept to.

Why that changes the arithmetic

A Debt Arrangement Scheme writes off none of the money you owe. Interest, fees, penalties and charges stop, so the balance stops growing, but the principal is repaid to the last penny.

Where interest keeps running on a plan, the balance falls by less than you paid in. Whether a Debt Arrangement Scheme writes off any of your debt deals with what the scheme does and does not do to the balance.

A programme can be approved without unanimity, and a plan cannot proceed at all against a creditor that refuses. That is the whole practical difference.

The statutory threshold

Not all of them. Since 4 November 2019 a programme for an individual is approved where not less than nine tenths in value of the creditors consent, under regulations 23(1)(a) and 24(1) of the Debt Arrangement Scheme (Scotland) Regulations 2011.

The test is nine tenths by value, not by number. A single creditor holding more than a tenth of the total can withhold consent and put the application to the fair and reasonable test.

Silence counts as consent. Regulation 23(5) deems a creditor who does not respond within 21 days of the request to have consented, irrespective of any assignation of the debt.

That rule applies only to a programme providing for the payment of more than one debt. A programme covering a single debt gets no deemed consent.

Programmes applied for before 4 November 2019 are not affected. Those keep the unanimous consent rule and the old eight per cent distributor fee.

And it is not just arithmetic

Reaching nine tenths does not end the matter. Regulation 24(1) is subject to regulation 24(1A), in force since 1 April 2015, so a programme for an individual may only be approved in accordance with the Common Financial Tool.

Where the threshold is not reached, the application goes to the fair and reasonable test rather than failing. Whether all your creditors have to agree sets out both routes.

On a plan

Each creditor decides separately. Any of them can refuse the offer, keep adding interest, pass the debt to a collection agency or sell it on.

Payments still reduce the balance where a creditor refuses the arrangement. What you lose is the certainty rather than the payment.

The Debt Arrangement Scheme costs an individual nothing. A debt management plan may be free or may not be, and that depends entirely on who runs it.

Money side by side

Since 4 November 2019 a money adviser may not charge an individual a fee for Debt Arrangement Scheme work, under regulation 12(2) as substituted by SSI 2019/315.

A payments distributor may make no charge of any kind to a debtor. You pay one figure and it is split between the creditors.

The fee that does exist in the scheme

Twenty per cent for an individual, under regulation 17(2) as substituted by SSI 2019/315 with effect from 4 November 2019. For Business DAS it is a ceiling rather than a rate, because a distributor may charge no more than eight per cent.

It comes out of what reaches creditors rather than being added to your debt, which how much a Debt Arrangement Scheme costs explains in full.

Checking who you are dealing with

Anyone running a debt management plan by way of business needs Financial Conduct Authority authorisation for debt counselling and debt adjusting, and not-for-profit bodies are not exempt from that.

The rules for those firms sit in the Financial Conduct Authority’s debt management chapter, and the regulator warns consumers about unauthorised advice in terms.

In the statutory scheme the equivalent question is who your money adviser is, which whether you need a money adviser covers.

Less is published about either than most pages suggest. Neither has a single credit-file entry of its own, and what shows in both cases is how each creditor reports each account.

The scheme

No credit reference agency publishes a retention rule for a Debt Arrangement Scheme. Experian, Equifax and TransUnion all publish what they hold and for how long, and none of them lists a Debt Arrangement Scheme at all.

Citizens Advice Scotland says your credit rating is affected for as long as you are in the programme, which is the only duration any named source gives. How to rebuild your credit afterwards sets out what you can actually do.

The plan

There is no register of debt management plans. StepChange says nothing in your credit report shows you are on one.

What appears instead is account-level. Reduced payments may be recorded as partial payments, some creditors add an arrangement marker, and defaults are common.

The claim to be wary of

Some pages say a plan will not harm your credit score and may even improve it. Nothing published supports that, and it is not how reduced payments are normally reported.

Creditors may record a plan as a form of default. Treat any promise about a score as marketing.

Start with whether you can repay in full from surplus income in a reasonable period. If you can, the statutory scheme gives you the same payment with protection attached.

Working it through

There is no minimum debt and no maximum. A programme may be approved where it provides for the payment of one or more debts, so a single debt is enough.

When a plan is the better fit

Where the difficulty is short and you expect it to resolve, an informal arrangement can be a holding position. It can be stopped without a process when the position changes.

It is also the option outside Scotland, because the Debt Arrangement Scheme is Scottish. Advice written for England and Wales is describing a different set of rules.

When neither is the answer

Both routes repay the debt in full. If that is not realistic, the conversation is about a trust deed or Minimal Asset Process bankruptcy instead.

The trade-offs in the statutory scheme are worth reading before you commit. The disadvantages of a Debt Arrangement Scheme covers them, and our Debt Arrangement Scheme page explains how we help.