Individuals with problem debt will be protected by a new Breathing Space scheme, due to be introduced in 2021, City minister John Glen announced today.

The new plans will see the introduction of a 60-day ‘breathing space’ period from 2021, where people with problem debts will be protected from enforcement action from creditors and will see their interest frozen.

During this period, those in debt will have to engage with professional debt advisers, allowing them to find a long-term solution to their debts and get back on track with repayments.

Furthermore, as part of the scheme, and to acknowledge the links between problem debt and mental health issues, the government is also confirming that individuals receiving NHS treatment for mental health crisis will not need to seek debt advice during the 60-day period. This will remove a key barrier to access for this group. They will continue to receive the same Breathing Space protections, which will last for the entire duration of their treatment.

Glen added: ““Problem debt can have a devastating impact of people’s lives, putting a huge burden on individuals which can lead to family breakdown, stress and mental health issues.

“No one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors.

“That’s why I’m introducing this new scheme, giving everyone access to the advice, time and support they need to both get their finances under control and get away from the perpetual stress and worry debt can cause.”

Crucially, the scheme will cover a broad range of debts including arrears owed to central and local government. This will mean council tax arrears, personal tax debts and benefit overpayments will be included.

As well as Breathing Space and the support for those in mental health crisis, the package also includes a Statutory Debt Repayment Plan for those with problem debt, which offers similar protection to the Breathing Space scheme, helping individuals to repay their debts over a manageable timeframe. The plan will adjust as people’s life circumstances change, which could mean decreasing monthly payments if their disposable income has changed.

Also commenting, Money Advice Trust chief executive Joanna Elson OBE stated: ““Breathing Space will provide a powerful incentive for people to seek debt advice, safe in the knowledge they will be given the time and statutory protections they need to begin to resolve their financial difficulty.

“The decision to include local authorities and other public sector creditors is particularly welcome – and means this new scheme could well be a game-changer in our efforts to tackle problem debt as a society.”

Royal London personal finance specialist Becky O’Connor added: “Problem debt can happen to anyone at any time in their life. It’s not necessarily the result of someone failing to manage their money properly, but can be the consequence of sudden misfortune, ill health, job loss, divorce or caring responsibilities, for example.

“Any one of us could benefit from this breathing space period at some time in our lives, as a result of struggling in unforeseen circumstances.”

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