Next year will, hopefully, see the launch of Breathing Space, a scheme to help people who are in debt. It plans to do this by giving people in debt a 60-day window when creditors are not allowed to chase them - as long as they negotiate a debt repayment plan with a professional debt adviser and reach a long-term solution for repaying their loans.
Last year, the Treasury published an impact assessment on the proposed scheme. It’s estimated that there are c. nine million people in debt in the UK, but only around 1.1m of them receive advice each year. The Treasury also estimates that between 650,000 and 2.9m people who are in debt could benefit from professional advice but don’t ask for it. Those who do seek help frequently do so at a late stage and then take the quickest rather than most sustainable solution.
There ought to be benefits all round. The scheme will be compulsory for credit providers (this includes banks and credit unions) and it is hoped/expected to save £500m a year in excess interest payments while also recovering up to £5bn in unpaid debts. It’s also hoped that Breathing Space will help over 700,000 people to access professional advice in its first year, increasing to 1.2m a year by 2031.
Crucially, and in a reflection of the increased awareness of the issue, Breathing Space will include a mental health crisis moratorium for those receiving treatment. For anyone who falls into this category, the protections available under the scheme will last for the duration of their medical treatment and then a further 30 days.
There will be a number of obligations on debtors under the scheme and while engaging with debt advisers they must continue to meet their ongoing liabilities if they can. There will then be a check at the 30-day point to ensure the debtor is keeping to the terms of the agreement.
The origins of this scheme go back to 2017, however, if it is properly implemented then a lot of the key bodies involved in this field, such as Citizens Advice, believe it will help a lot of people who, otherwise, might end up even more in debt than when they started.
Julie Downie, Accounts Manager, MSactax