Breathing Space will give people facing financial difficulties time to receive debt advice, or mental health crisis treatment, without pressure from creditors or mounting debts.
Under the scheme, people will be given legal protections from creditors for 60 days with most interest and penalty charges frozen and enforcement action halted. They will also receive professional debt advice to design a plan which helps to get their finances back on track.
In recognition of the link between problem debt and mental health issues, the protections will be made available for patients undergoing in mental health crisis treatment for the duration of their treatment plus an extra 30 days.
Everyone in England and Wales could be eligible, and the Government expects 700,000 people to benefit in the first year of the scheme.
As a MP, much of my casework revolves around debt issues that people are facing. So I welcome the new Breathing Space scheme to help by giving people legal protection from creditors and that anyone receiving mental health crisis treatment will also benefit. With professional debt advice provided to people to design a plan to put their finances back on track, this will help get their finances back on track.
Martin Lewis, founder of MoneySavingExpert.com and the Money and Mental Health Policy Institute, said:
Debt is far more than just a financial issue. It’s a major cause of relationship breakdown, can hugely diminish people’s well-being, and sadly leaves 100,000s at risk of taking their own lives. Breathing Space is...a win-win-win; for individuals who get their finances back on track, creditors who’ll recoup more cash in the long run, and the economy as there will be less financial catastrophe.
The announcement builds on other recent government work to alleviate problem debt – and the associated mental health problems - including introducing new rules to make debt letters less threatening, funding a no-interest loan pilot, maintaining record levels of debt advice funding for the Money and Pensions Service in 2021-22 and looking at raising the financial threshold criteria for individuals to enter a Debt Relief Order.
The scheme is also expected to benefit creditors, with over £400 million in extra debt repayments expected in the first year of the scheme, as people are supported to get their payments back on track.
How to access
Breathing Space can be accessed by contacting a professional debt advisor. Given this may not be possible for someone in mental health crisis treatment, an approved mental health professional can certify they are receiving treatment and then a debt advice provider can consider whether they are eligible for the scheme.
- Most debts will qualify for a breathing space, including credit and store cards; personal and payday loans; overdrafts; utility bills, rent and mortgages arrears; and government debts like tax and benefits.
- Universal Credit overpayments will be included in the Breathing Space scheme from day one and Universal Credit advances and third-party deductions will be included on a phased basis as early as possible after the policy starts.
- Although interest and fees are frozen, a Breathing Space is not a payment holiday. People entering a Breathing Space will need to keep paying for any debts and ongoing liabilities they have – like their mortgage, rent and bills - whilst they work with a debt advisor to find a sustainable debt solution. If someone in a standard Breathing Space fails to comply with these obligations, then a debt adviser has the discretion to cancel their Breathing Space.
- The Insolvency Service is HMT’s delivery partner for Breathing Space – it has developed and will maintain an electronic service used by debt advisers for starting, updating and ending a Breathing Space. The Insolvency Service will send notifications to creditors and their agents about a Breathing Space. It is also responsible for maintaining a private register of individuals in a Breathing Space or whose Breathing Space ended or was cancelled in the past 15 months.