The government has admitted that “hundreds of thousands” of people will use the new Breathing Space system, during which they cannot be chased for outstanding debt.
John Glen, Economic Secretary to the Treasury, says: “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.”
Under the scheme, which came into effect this week, people will be given legal protections from their creditors - including letting agents and landlords - 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.
Additional protections will be available for people in mental health crisis treatment – for the full duration of their crisis treatment plus another 30 days.
The government expects 700,000 people to benefit in the first year of the scheme.
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.
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.
Although interest and fees are frozen, the government insists that 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.
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Just another piece of the jigsaw put in place to stop the tsunami of evictions and buy themselves time up until the summer recess to hastily ram the Renters Reform Bill through Parliament in no doubt some primitive and ill thought out way.
I fully agree.
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