A 60 day breathing space to help those in debt, first announced in June of last year has been finalised by the government.
The new breathing space period will freeze interest, fees and enforcement for people in problem debt, with further protections for those in mental health crisis treatment.
A 60-day breathing space period will see enforcement action from creditors halted.
A 60-day breathing space period will see
enforcement action from creditors halted and interest frozen for people with
problem debt. During this period, individuals will receive professional debt
advice to find a long-term solution to their financial difficulties.
As well as this, those receiving mental health
crisis treatment will receive the same protections until their treatment is
complete. Acknowledging of the clear
impact problem debt can have on wellbeing.
The impact assessment for breathing space, published today, forecasts that it will help over 700,000 people across the UK get professional help in its first year, increasing up to 1.2 million a year by the tenth year of operation.
Of this, 25,000 to 50,000 people in mental health crisis treatment are expected to benefit from breathing space every year.
The Economic Secretary to the Treasury, John Glen, said:
Being trapped in debt can be an
incredibly difficult experience, and with interest and potential enforcement
action to contend with, it’s no surprise how stressful the impact can be.
Today’s figures underline just how critical it is
that we roll out this policy, particularly on a day like today, where we should
all work to reduce the stigma of mental health issues.
That’s why we will introduce breathing space in early 2021 as planned, so we can level up the whole country and help millions of people to rid themselves of problem debt.
Debt advisors welcome the new breathing space.
We know that debt is bad for your
mental health, with all the additional stress and anxiety that it can create.
Around two in five people who seek out debt help have an additional
vulnerability on top of their debt. For half of them, that vulnerability is a
mental health problem.
However, the good news is that after debt advice,
many people report improvements in their wellbeing such as being able to sleep
better at night or cope better with day-to-day life.
Breathing space will deliver much needed additional help in two important and connected ways. It will encourage more people to seek advice, and when they do, there will be better protections in place to stop further harm and help recovery.
Joanna Elson OBE, chief executive of the Money Advice Trust, said:
Breathing Space will provide a powerful new incentive for people in problem debt to seek the free advice they need. And it will give them the time and protections necessary to get back on the road to financial health.
We are particularly pleased that debts to local authorities and other government creditors will be included. Breathing Space will make a real difference to people in problem debt. We look forward to playing our part in making this scheme a success.
Craig Simmons, Head of Debt Policy and Strategy at the Money and Pensions Service, said:
Having worked on the policy behind Breathing Space, it’s great to see it coming into effect in 2021. We welcome the fact that many people will benefit from 60 days without contact from their creditors. In this time, they can get debt advice and put a plan of action in place. All without further interest and charges being added to their debts.
Breathing space has a particular role in helping those struggling with mental health and money problems to receive appropriate support. This policy is one of many landscape shifting initiatives we expect to see as part of the UK Strategy for Financial Wellbeing. We continue to trial, deliver and promote other interventions that can make a real difference to people’s lives.
As well as covering debts like credit cards and
loans, breathing space will cover a wide range of government debts.
Creditors will also benefit from introducing breathing space. With over £400 million in extra repayments expected in the first year, as individuals get the support they need to get their payments back on track.
The announcement builds on previous government work to alleviate the impact of problem debt. This includes reforming regulation around consumer credit, widening access to professional debt advice and helping build individual financial resilience.
If you are struggling with debt problems, Ramsey Lomax can help. contact Ramsey Lomax.
“over 13 years of dedicated advice.”
“People struggling with debt should seek help as early as possible.”
This is good advice from a leading charity. Taking the first step is always difficult but it is vital. There is help out there and solutions that can help, but you need to take the first step towards getting good debt advice. We have listened to the stories of 1000s of people and are constantly striving to help them. It is our mission to explore all their options and find a solution to help them become debt free. And what’s more, we have helped 1000s to achieve their goals since 2007, over 12 years of dedicated advice.
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Taking that first step is not always easy but is a crucial step towards helping you to find financial freedom.