Hundreds of thousands of people struggling with debt problems will be supported through the newly launched debt respite scheme. The Breathing Space measures will give those facing financial difficulties space to receive debt advice, or mental health crisis treatment, without pressure from creditors or mounting debts.
Under the scheme, people will be given legal protection 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.
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.”
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.”
Martin Lewis, 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.”
Andrew Wilson, Chairman of the High Court Enforcement Officers Association, said “We support the 60-day Breathing Space period as a means to encourage people with problem debt to seek appropriate, long-term support. We have been working with our members to ensure everyone is aware of the new regulations as part of their existing commitments to practice sympathetic and responsible enforcement activity. This involves preparing members to ensure the systems they have in place include the new Debt Respite Scheme, as well as making sure all training materials and other documentation are kept up to date.”
Mark Sands, Chair of the Personal Insolvency Committee at insolvency trade body R3, said “The introduction of the breathing space scheme comes not a moment too soon. The pandemic has dealt a body blow to many people’s incomes and savings, and this policy could make a real difference in helping individuals to find the best way of resolving their financial situation.”
“In our view, the scheme does a good job of balancing the needs of people in debt with the rights of their creditors, and it has been set up in such a way that the scheme is rightly part of a journey, rather than a destination in and of itself.”
“The breathing space scheme has the potential to help many thousands of people who have well-founded worries about their finances, and who need time and guidance to assess their position, speak to an advisor, and plot a path forwards. We hope the scheme gets good pick-up, and that it provides a measure of relief and direction to all who need it.”
Lorraine Charlton, Debt Expert at Citizens Advice, said “The coronavirus pandemic has had a huge impact on lots of people’s finances, with millions falling behind on essential bills and getting into debt. With temporary protections on debt coming to an end, we’re worried that the real struggle will soon begin for many.”
“We know that struggles with debt and with mental health often go hand in hand. If you’re in the midst of a crisis, the special provisions in Breathing Space should give you the time and space you need until you are ready to address your problem debt.”
“Really importantly, these provisions only apply if you’re currently receiving crisis treatment when you make the application. So, even if you are struggling with your mental health, you won’t be eligible unless an approved professional confirms that you’re getting crisis treatment.”
“Most common types of problem debt would be qualifying debts in Breathing Space. This includes priority debts – like rent arrears or council tax debt – that can have particularly severe consequences when you can’t pay them.”
Dave Heathcote, Insolvency Director at TDX Group has welcomed introduction of the Debt Respite Scheme but sees an increasingly complex debt landscape ahead needing further support and new solutions he said “Today’s long-awaiting introduction of the Debt Respite Scheme1 is a welcome and extremely timely move in the ongoing fight against debt. Providing a lifeline for indebted consumers via a temporary pause from most creditor enforcement action, Breathing Space offers a 60-day window for people to engage with formal debt advice, and consider repayment options best suited to their needs. ”
“Breathing Space is an important step in how society manages problem debt, however, its impact will be limited in cushioning against the potential wall of debt many will face down the line. Against the backdrop of increasingly positive news on the UK’s vaccination roll out and a potential return to normality, a more sombre and fuller picture of the pandemic’s financial impact will emerge as government support schemes and forbearance winds down.”
“In the darkest days of the winter lockdowns, research2 showed concerning growth in the number of people facing financial difficulties, with almost half (47%) worrying about money every day and 24% feeling incapable of managing their finances. Lockdown lifted the lid on this underlying financial divide, but government support, as necessary as it was, masked the reality for those on lower incomes or facing unemployment. Now, as the tide goes out on financial support, the force of the wave of debt building since the pandemic began may be felt.”
“Both people and businesses will need greater support, new solutions and innovative thinking to navigate future problem debt. The pandemic’s impact should accelerate improvements in how financial difficulty is supported, and the government’s mental health recovery plan3 already highlights the crucial role the debt management industry has to play. In the meantime, it’s vital for those in financial difficulty to fully capitalise on Breathing Space, and for creditors to use it as an intervention trigger to craft a sustainable, long-term customer journey out of debt.”
Kevin Still, Director at DEMSA said “I think we all hope that the launch will encourage more people in problem debt to approach a regulated debt adviser for an assessment as to whether they are in need of breathing space and what future changes in circumstance may influence this position.”
“Breathing space won’t be right for everyone, however, seeking help earlier is a key message from the recent FCA Financial Lives survey in February 2021 as COVID-19 forbearance schemes come to an end. DEMSA believes that the Debt Respite Scheme is an important enabler for better engagement, particularly those individuals and couples showing characteristics of vulnerability.”