Millions of people in debt to get a 60 day “breathing space” - here’s what you need to know
In-debt Brits will be given a two-month “breathing space” period to help them handle repayments, the government has announced.
There are an estimated nine million people with unmanageable debt in the UK - around six per cent of the entire adult population - according to the government’s own figures.
The announcement comes after the Money and Pensions Service advised the government that the “stigma attached to being in problem debt” can often force people to delay seeking financial advice.
How it works
Starting in 2021, the plan will see enforcement action from creditors halted and interest charges frozen for 60 days for people with problem debt.
During the “breathing space” period, people will be able to get debt advice from professionals to help find a long-term solution to their financial issues.
The government hopes that the move will encourage more people to seek help before their debt becomes overwhelming.
The Treasury estimates that more than 700,000 people could be aided by the policy each year.
They also promised that people receiving mental health treatment would get the same financial protection, acknowledging the impact of long-term debt on wellbeing.
An estimated 25,000 people in mental health crisis treatment could benefit from the measures each year.
Economic Secretary to the Treasury, John Glen MP 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.”
How debt charities reacted
Several charities have welcomed the government’s announcement, including StepChange.
CEO, Phil Andrew, said: “We know that debt is bad for your mental health, with all the additional stress and anxiety that it can create. Breathing space will deliver much needed additional help in two important and connected ways.”
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 give them the time and protections necessary to get back on the road to financial health.”
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.”