People in debt will be given 60 days to get their finances back on track without debts piling up, worrying letters or enforcement action, under a new government scheme.
The scheme – called ‘Breathing Space’ – will give those in debt legal protections from their creditors for 60 days, with most interest and penalty charges frozen, and enforcement actions halted.
They will also receive professional debt advice to design a plan that helps them get their finances back on track.
The protections will also be available to those in mental health crisis treatment for the full duration of their treatment, plus another 30 days.
However, the scheme, which launches today, is not a payment holiday – those making use of Breathing Space will need to keep paying for any debts and ongoing liabilities, like their mortgage, rent and bills.
If someone making use of the scheme behaves like they are on a payment holiday, a debt adviser can drop them from 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.”
Most debts included
Breathing Space can be accessed by contacting a professional debt advisor, or by an approved mental health professional for someone in a mental health crisis.
Most debts will qualify for the scheme, 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.
The Treasury said the scheme will also benefit creditors, with more than £400m in extra debt repayments expected in the first year of the scheme, as people are supported to get their payments back on track.
Martin Lewis, founder of MoneySavingExpert.com and the Money and Mental Health Policy Institute, added: “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.”