Westminster Letter

BREATHING SPACE FOR PEOPLE WITH PROBLEM DEBTS

When we purchase items using a credit card, we can be compensated if the goods or services are not as advertised, or if they stop working.  If we sign up for insurance or a similar financial service, we are able to cancel the arrangement within an agreed time limit if we change our minds and decide not to go ahead with the service.

However, if someone is struggling with problem debts, up until now there has been no formalised arrangement to help them by giving them time to think over how to resolve their situation.

A new Breathing Space scheme, to be introduced from 2021, will protect people who have problem debt by freezing the interest payments and halting enforcement action by creditors. They will have a 60 days grace period so that they can get their finances under control. During this time, they would have able to talk to professional debt advisers, getting the advice and support they need. This will apply to those who have local or central government debts, such as council tax arrears or personal tax debts.  As a constituency MP I can attest for the profound effect suffered by some who have been asked to pay the Loan Charge, which goes back over a number of years.

Problem debt can have a devastating impact on people’s lives and in consequence it can have an adverse effect on mental health too. Sadly, it is recognised that there are links between problem debt and mental health issues. Individuals receiving NHS treatment for a mental health crisis will not need to seek advice during the 60-day period. They will continue to receive Breathing Space protections which will last throughout their treatment.

The scheme includes a Statutory Debt Repayment Plan to help individuals repay debts over a manageable timeframe.