New ‘Breathing Space’ Debt Scheme Launched

The Government has launched a new scheme to help people struggling with problem debt. Up to 700,000 people are expected to benefit from the ‘Breathing Space’ scheme.

What does the Breathing Space Scheme provide?

• The scheme will give those facing financial difficulties 60 days to get finances back on track – without debts piling up, worrying letters or enforcement action. Most interest and penalty charges will be frozen during this period, and enforcement action halted.
• People will also have access to professional debt advice, with stronger protections for people in mental health crisis treatment. The aim is that this support will help them to design a plan to get their finances back on track.

The protections from the scheme will be available for people in mental health crisis treatment for the full duration of their crisis treatment, plus another 30 days. This is because there is often a link between problem debt and mental health issues.

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.

John Glen, 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.’

How to access 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.

The Insolvency Service is the Treasury’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.

Which debts will qualify?

• 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.

Is this a payment holiday?

No – 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.

How does Breathing Space work if you are the creditor?

There are new rules that you must follow if you are notified that a debtor has entered into a Breathing Space. You can find more details here.