Under the scheme, people will be given legal
protections from their creditors for 60 days, with most
interest and penalty charges frozen, and enforcement
action halted. They will also receive professional debt
advice to design a plan which helps to get their
finances back on track.
And recognising the link between problem debt and
mental health issues, these protections will be
available for people in mental health crisis treatment
– for the full duration of their crisis treatment plus
another 30 days.
People across England and Wales who are struggling to
repay their debts could be eligible, and the Government
expects 700,000 people to benefit in the first year of
the scheme.
,
Economic Secretary to the Treasury, said:
We’re determined to tackle problem debt, but it is
incredibly hard to get your finances back on track
when your debts are piling up and you’ve got
creditors at the door.
This scheme will give people a breathing space from
charges, distressing letters and bailiff visits, so
they can tackle their problem debt with support from
a professional debt advisor.
And to help people going through a mental health
crisis, which is too often linked to financial
problems, we’re bringing in stronger protections
lasting beyond the end of their crisis treatment.
The standard Breathing Space can be accessed by
contacting a professional debt advisor. Given this may
not be possible for someone in mental health crisis
treatment, an approved mental health professional can
certify they are receiving treatment and then a debt
advice provider can consider whether they are eligible
for the scheme.
The announcement builds on other recent government work
to alleviate problem debt – and the associated mental
health problems - including introducing new rules to
make debt letters less threatening, funding a
no-interest loan pilot, maintaining record levels of
debt advice funding for the Money and Pensions Service
in 2021-22 and looking at raising the financial
threshold criteria for individuals to enter a Debt
Relief Order.
The scheme is also expected to benefit creditors, with
over £400 million in extra debt repayments expected in
the first year of the scheme, as people are supported
to get their payments back on track.
Joanna Elson CBE, chief executive of the Money Advice
Trust, the charity that runs National Debtline and
Business Debtline, said:
We are pleased to be supporting the launch of the
Breathing Space scheme, which is a major milestone in
improving the help available to people struggling
with debt. Breathing Space will provide a powerful
incentive for people in debt to seek free debt advice
– with vital protections from interest, charges and
creditor action to give people the time and space
they need to begin to deal with their financial
difficulty.
Free debt advice has never been more important than
in helping households to recover from the impact of
Covid-19 – and Breathing Space will strengthen our
ability to help people at this crucial time. We look
forward to playing our role in making the scheme a
success.
,
founder of MoneySavingExpert.com and the Money and
Mental Health Policy Institute, said:
Debt is far more than just a financial issue. It’s a
major cause of relationship breakdown, can hugely
diminish people’s well-being, and sadly leaves
100,000s at risk of taking their own lives. That’s
why Breathing Space is so important. It’s a
win-win-win; for individuals who get their finances
back on track, creditors who’ll recoup more cash in
the long run, and the economy as there will be less
financial catastrophe.
I’m especially thrilled that our Money and Mental
Health Policy Institute suggestion for Recovery Space
is coming into fruition as part of this. That means
from now on, everyone receiving NHS crisis care for
their mental health can recover without being hassled
for escalating debt, fees and charges. Finally,
people returning home after being hospitalised for
their mental health, can do it safe in the knowledge
there’s no threat or reality of bailiffs knocking.
Phil Andrew, CEO of StepChange Debt Charity, said:
We are delighted to see Breathing Space going live.
Giving people the statutory protection of a time
period to help them begin to deal with their debts is
a huge step up from the previous voluntary, patchy
approach. StepChange has been at the forefront of
campaigning for Breathing Space since 2014, and we
are pleased the Government has taken our evidence and
client experience on board when putting the scheme
into practice.
This is the latest piece in the jigsaw of safeguards
for people experiencing problem debt, with more to
come. Statutory Debt Repayment Plans, when they come
into being, are set to give further, much needed
protections. We look forward to working closely with
the Treasury to ensure they are successfully
implemented.
- Most debts will qualify for a breathing space,
including credit and store cards; personal and payday
loans; overdrafts; utility bills, rent and mortgages
arrears; and government debts like tax and benefits.
- Universal Credit overpayments will be included in
the Breathing Space scheme from day one and Universal
Credit advances and third-party deductions will be
included on a phased basis as early as possible after
the policy starts.
- Although interest and fees are frozen, a Breathing
Space is not a payment holiday. People entering a
Breathing Space will need to keep paying for any debts
and ongoing liabilities they have – like their
mortgage, rent and bills - whilst they work with a debt
advisor to find a sustainable debt solution. If someone
in a standard Breathing Space fails to comply with
these obligations, then a debt adviser has the
discretion to cancel their Breathing Space.
- The Insolvency Service is HMT’s delivery partner
for Breathing Space – it has developed and will
maintain an electronic service used by debt advisers
for starting, updating and ending a Breathing Space.
The Insolvency Service will send notifications to
creditors and their agents about a Breathing Space. It
is also responsible for maintaining a private register
of individuals in a Breathing Space or whose Breathing
Space ended or was cancelled in the past 15 months.
