60-day ‘breathing space’ scheme for people struggling with problem debt

People struggling with problem debt will be given extra help and time to wrestle their finances back under control – including when they owe money to the Government, City Minister John Glen has announced.

The Government will introduce 60-day “breathing space” periods from 2021.

People with problem debts will be protected from enforcement action from creditors and will see their debts frozen, the Treasury said.

The scheme was welcomed by those helping people with problem debts, who said it could save lives.

Crucially, the scheme will cover a broad range of debts including arrears owed to central and local government bodies.

This means council tax arrears, personal tax debts and benefit overpayments will be included.

Charities have recently highlighted concerns over aggressive methods being used to collect council tax debts.

During the breathing space periods, those in debt must engage with professional debt advisers, so they can find a long-term solution to their debts and get back on track with payments.

People receiving NHS treatment for mental health crises will not need to seek debt advice during the 60-day period – making it easier for them to access the scheme as they can still receive the breathing space protections while having treatment.

The measures include a statutory debt repayment plan for those with problem debt, helping people to repay their debts over a manageable timeframe.

The plan will adjust as people’s life circumstances change, which could mean reducing monthly payments if someone’s disposable income has changed.

Mr Glen, 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 plans have been welcomed by charities helping people with problem debts.

Helen Undy, chief executive of the Money and Mental Health Policy Institute, which was set up by consumer champion Martin Lewis, said: “This scheme could genuinely save lives.

“Everyone experiencing a mental health crisis should have the opportunity to recover free from escalating debt fees, charges and the threat of bailiffs arriving at their door.

“We are delighted that the Government acted on our call to protect people from being hassled about debts while they’re receiving crisis care, and we look forward to working with ministers to put these plans in place over the coming year.”

Phil Andrew, chief executive of the StepChange Debt Charity, said: “People looking for a sustainable way to repay their debts have traditionally had little protection, leaving them vulnerable to inconsistent approaches by different creditors that can harm their chances of recovery – something as a debt charity we’ve long felt needed reform.

“Breathing space and statutory debt repayment plans will fundamentally improve how people seeking to repay debt are treated, putting them in a far less precarious position.

“We’re particularly pleased to see the Government’s confirmation that debts owed to Government itself will be included in the scheme.”

Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: “Breathing space will provide a powerful incentive for people to seek debt advice, safe in the knowledge they will be given the time and statutory protections they need to begin to resolve their financial difficulty.

“The decision to include local authorities and other public sector creditors is particularly welcome – and means this new scheme could well be a game-changer in our efforts to tackle problem debt as a society.”

The announcement follows the recent consultation on the proposals.

The regulations on the breathing space scheme will be put to Parliament before the end of the year, to be implemented in early 2021.