The ‘Breathing Space Scheme’ from the 2017 manifesto will go ahead according to an announcement made by The Treasury. The scheme has been developed with the primary aim of aiding those in significant debt or ‘problem debt’, helping them to take back control of finances. Our article will take a closer look at the scheme.

The Money Charity has suggested that as of April 2019, the average UK household debt was just shy of £60,000 – including mortgages. The scheme tackles this issue by proposing a 60-day grace period in which no creditors are allowed to request payments and enforcement actions against those in debt are banned. Moreover, during this period all interest on payments owed shall be stalled.

The government foresees the scheme to:

Protect individuals and enable them to find a sustainable solution for their debts
Encourage people to look for financial and debt advice

Defining ‘Problem Debt’

Debt becomes ‘problem debt’ if the person owing money is significantly behind on their payments, or alternatively, if the person has had their household utilities disconnected at any time in the previous 12 months.

Debts included in the scheme are those debts owed to the UK Government, such as overpaid benefits and arrears of council tax. This is relevant at current because of the changes to the benefit system, namely Universal Credit.
 
Eligibility Criteria

The grace period comes with eligibility criteria. To be able to access this breathing period, the individual applying must enroll in professional debt services. This is so the individual does not abuse the system and implements a payment plan. It will also help any future debts to be prevented or addressed earlier.
 
Mental Health

The Money and Mental health Policy Institute state that 46% of individuals with problem debt also have mental health issues. The scheme will be another protective layer for the benefit of mental health sufferers. Those that are receiving mental health support or treatment from NHS services will not need to fulfill the previous criteria, i.e. seek debt services, to receive the breathing period.

Once their mental health treatment has been concluded, the scheme will start and the individual must engage with professional debt services. The overarching aim is to allow the person to focus on their health and treatments with the knowledge that their financial position will not worsen during this time. Moreover, financial services will be available to help once they are ready.
 
Proposed Repayment Plan

The proposal is joined by a repayment plan, which reflects aspects of the scheme. The plan gives individuals an opportunity to initiate agreements between the companies they owe. The plan intends to be flexible, accounting for changes in circumstances. When the plan is in place, enforcement actions will be suspended, and creditors are unable to add interest or default fees on any debts within the plan.
 
Conclusion

Overall, the scheme and its components appear to be a positive and helpful move for those dealing with problem debts – and the negative impacts it may have on other areas of life. The scheme remains at a consultation stage and is penciled in to begin in 2021.

If you are facing debt concerns and are being chased by creditors, then contact our Debt Recovery team who can provide advice on your situation.  Contact law@robsols.co.uk or phone us on 029 2023 7777.