Debt strugglers to get breathing space under new scheme to freeze interest payments without punishment for two months
- Scheme, called Breathing Space, to provide respite for those with range of debts
- During 60 days any fees, charges, interest or collections activity are suspended
- Under the government scheme, there is no minimum or maximum level of debt
Households struggling to keep up with their debts will be able to freeze interest payments and avoid legal action for 60 days, thanks to new government measures.
The scheme, called Breathing Space, will provide respite for those with a range of debts from council tax arrears to credit cards and overdrafts.
During the 60 days any fees, charges, interest or collections activity are suspended.
To be eligible, individuals must seek help from professional debt advisers to get back on track with payments.
Under the scheme, there is no minimum or maximum level of debt – it will be for the debt advisers to determine. The Government created a further set of rules for the scheme to help those in debt with mental health problems.
The scheme will provide respite for those with a range of debts from council tax arrears to credit cards and overdrafts
Individuals receiving NHS treatment for a mental health crisis will not need to seek debt advice during the 60-day period but will still benefit from the freeze on interest and protection from enforcement.
Helen Undy, chief executive of the Money and Mental Health Policy Institute, 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.’
Research by the institute showed that 23,000 people in England struggled with problem debt last year while receiving hospital treatment for mental health.
As part of the measures, a Statutory Debt Repayment Plan, which offers similar protection to the Breathing Space scheme, will help individuals 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 their disposable income drops.
John Glen, City minister, said: ‘Problem debt can have a devastating impact of people’s lives, putting a huge burden on individuals.
As part of the measures, a Statutory Debt Repayment Plan will help individuals to repay their debts over a manageable timeframe
‘No one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors.’ The Breathing Space scheme was first announced in the Budget when the Chancellor said that anyone in serious debt will get a 60-day breather – up from the six weeks that had been previously suggested.
The Breathing Space scheme will now be put to Parliament before the end of the year, to be implemented in early 2021.
Free debt advice is available from charities such as Citizens Advice at citizensadvice.org.uk, National Debtline on 0808 808 4000; nationaldebtline.org and StepChange on 0800 138 1111.