Individuals suffering from ‘problem’ debt will now be given a window of opportunity to help address their problems and repay what they owe.
Under the new measures announced this week, the ‘Breathing Space’ scheme will “protect individuals with problem debt by freezing interest payments” and “halting enforcement action from creditors”.
It comes after research revealed that hundreds of thousands of families get “stuck” in an endless cycle of debt as interest fees and charges increase faster than an individual can repay the debt. According to the charity StepChange, over 657,000 people used its services in 2018, an increase of six per cent compared to the year previous.
The scheme – which will cover a wide range of debts, including both commercial and public sector credit such as personal tax debts, benefit overpayments and council tax debt – will see the introduction of a 60-day window, during which time debtors must engage with professional debt advisers to formulate plans to repay what is owed.
Commenting on the announcement, City minister, John Glen, said: “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.”
It is believed that the scheme will go into effect from 2021.