Breathing Space scheme to help those in debt launched

Breathing Space will allow people to access legal protections from creditors for 60 days while they seek professional debt support.

Protections are strengthened for those in mental health crisis, allowing them to access support beyond the end of their treatment.

The Government estimate 700,000 people in problem debt could benefit from the Breathing Space scheme in 2021.

Credit: Andrey_Popov/Shutterstock.com

Breathing Space

Under the new legal protections, those facing severe financial difficulties can contact a professional debt advisor to access Breathing Space.

It means customers will be given respite from extra charges, debt reminder letters and other enforcement action like bailiff visits.

Debts including credit cards, personal loans, overdrafts, store cards, payday loans, utility bills, rent and mortgage arrears and debts like tax and benefit overpayments will qualify for the scheme.

There's extra support for those in mental health crisis, with approved mental health professionals able to certify the person is in treatment and have their case assessed by a debt advice provider to check if they are eligible for Breathing Space.

To avoid further stress to those in mental health crisis, the breathing space term will conclude 30 days after the end of their treatment rather than risk expiring while they're still in crisis.

It's important to note Breathing Space is a break from debts continuing to pile up and is not a payment holiday. Customers must continue to pay their ongoing bills while they work with a debt advisor to form a plan for the long term.

Debt support

The Government expects 700,000 people to benefit from Breathing Space in the first year of the scheme, with debt charity StepChange calling it a "landmark" piece of legislation.

Protections for those in mental health crisis are especially welcome as the link between problem debt and mental health problems has long been noted.

Yet some campaigners say the scheme doesn't go far enough. Initially, debt advisors wanted the breathing space to last for up to 12 months, but creditors objected to this and 60 days is the current limit, with debtors only able to apply for Breathing Space a maximum of once a year (until they're applying for Mental Health Breathing Space).

So, while the 60 days of room to access debt support and get a plan in place will be useful for many, it's worth remembering that timeframe may be too short for some to put together a sustainable solution to get out of debt.

In addition, there may be some debts that aren't covered under the legislation, such as a guarantor being asked to pay the balance of a loan taking out by someone who has access the Breathing Space scheme.

Read more about where to get help with debt.

Problem debt

According to figures released by StepChange last month, approximately 2.4 million are currently in problem debt and 4 million are behind on household bills.

Electricity bills were the second most likely to be in arrears. 35% of those in difficulty were struggling to pay those bills, while 38% were struggling with council tax and 31% were finding it hard to pay their rent.

This correlates with figures from Citizens Advice in December 2020 showing 2.1 million were in debt with their energy provider, an increase of 600,000 on pre-pandemic levels.

The coronavirus crisis has certainly exacerbated debt issues in the UK, and the Financial Conduct Authority (FCA) released data in February suggesting 27% of UK adults are unable to withstand financial shocks, an increase of 3.5 million people.