Thousands of people struggling with problem debt in the UK will get relief under a new ‘breathing space’ scheme which will block creditors from chasing them for 60 days.
As reported by The Guardian, under the new initiative, those in severe debt will be protected from enforcement action from creditors and bailiffs, while interest payments, fees and charges will be frozen.
The Treasury has also confirmed that those experiencing mental health issues will benefit from extra protection and won’t need to seek debt advice for the 60 day period.
Bev Budsworth, MD of The Debt Advisor Ltd said: “The idea is that individuals struggling with debt are signposted to debt advice agencies that are regulated by The Financial Conduct Authority and during this 60 day period they actually get advice and aim to put together a solution to their debt.
“This could be a debt management plan, IVA, bankruptcy, debt relief order or just sensible budgeting advice so that they are better able to manage their finances. Creditors will be prevented from chasing which will be incredibly helpful to provide ‘breathing space’ as well.”
What debts does the ‘Breathing Space’ scheme cover?
The government scheme will cover a wide range of consumer debts, including council tax arrears, personal tax debts and benefit overpayments.
The dept respite scheme will give individuals and families struggling with their finances extra support and time to get on top of their bills and payments before they spiral out of control.
The new measures will include a statutory debt repayment plan for those with problem debt, which will help people to repay their debts over a more manageable timeframe.
When does the ‘Breathing Space’ scheme come into effect?
The breathing space scheme is expected to come into effect from early 2021.
Many debt management companies have previously highlighted concerns over the aggressive methods being used to collect debts – which has caused people increased stress, anxiety and financial difficulty.
John Glen, Economic Secretary to the Treasury and City Minister, said: “Problem debt can have a devastating impact of people’s lives, putting a huge burden on individuals which can lead to family breakdown, stress and mental health issues.
“No one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors.
“That’s why I’m introducing this new scheme, giving everyone access to the advice, time and support they need to both get their finances under control and get away from the perpetual stress and worry debt can cause.”
The breathing space scheme was a 2017 Conservative party manifesto commitment.
A welcome change
The plans have been welcomed by charities and companies helping people with problem debts, with many noting that the scheme could save lives.
During the 60 day breathing space periods, those in debt must engage with professional debt advisers in order to find a long-term solution to their debts and get back on track with payments.
However, people receiving NHS treatment for a “mental health crisis” would not need to seek debt advice during the 60-day period.
They will continue to receive the same Breathing Space protections, which will last for the whole of their treatment.
Over 8.3 million people in the UK are in problem debt and record numbers of people are seeking debt advice.
Are you struggling with problem debt?
The Debt Advisor may be able to help.
If you are struggling with debt, The Debt Advisor can help advise you on how to better manage your finances or help you to deal with debts.
The Debt Advisor Ltd is authorised and regulated by The Financial Conduct Authority, number 659920.
This means we are able to offer debt advice and deliver both formal and informal debt solutions. We hope that the information and debt advice on this site including Frequently Asked Questions, will help inform you.
Our free debt calculator can also give you a quick and easy guide into your financial situation, helping you work out how much you are paying on debts each month and the amount of disposable income you currently have.
There are sources of free debt advice and services. You can find out more by contacting the Money Advice Service on 0800 138 7777 or by visiting their website.