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‘Breathing Space’ debt rules come into force

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New rules have come into effect which provide people in debt with protection from those debts spiralling out of control.

The ‘Breathing Space’ scheme is open to people receiving official debt advice, and allows them to apply for a 60-day Breathing Space period. During this time, additional interest and fees on your debts are paused, while no enforcement action can be taken against you, for example through debt collectors.

In order to qualify, your debt adviser needs to agree that applying for the Breathing Space period is the right thing to do in your position, while you will have to continue to engage with your adviser and not take out any more borrowing of more than £500 during the Breathing Space period.

You will also be expected to continue your payments on things like housing costs, utility bills, and taxes. 

Importantly, you can only apply for Breathing Space once in a 12-month period.

A separate Breathing Space scheme has also launched for those undergoing treatment for a mental health crisis. You will need to have your situation confirmed by an independent mental health care professional, while the Breathing Space will run for as long you’re receiving crisis treatment, plus 30 days.

The introduction of the scheme follows warnings that as many as three million more people will spiral into debt this year.

Getting finances back on track

The government has suggested that as many as 700,000 across England and Wales could benefit in the first year of the scheme.

John Glen, economic secretary to the Treasury, pointed out that getting your finances on track can be incredibly hard when your debts are piling up and there are creditors at the door.

He added: “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.”

More support needed

Dave Heathcote, insolvency director at TDX Group, said that the introduction of the scheme was timely, and an important step in how society manages problem debt. However he warnedthat its impact will be limited in cushioning against the “wall of debt” some will face in the future.

He continued: “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 plan already highlights the crucial role the debt management industry has to play.” 

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