Millions in debt crisis to be helped by two-month 'breathing space'

MoneySavingExpert.com founder Martin Lewis has long campaigned for the Government to introduce breathing space for debt sufferers, to give them time to get advice and sort out their finances.

Last year, the Government confirmed that those struggling with serious debt will be given a 60-day respite, during which all interest and charges on their debt will be frozen, and they won't face enforcement action from their creditors.

If someone is receiving mental health crisis treatment, this breathing space will be extended until their treatment is complete.

The new rules will come into force in 2021, and today the Government published its impact assessment for the policy. It estimates that millions will benefit from breathing space over the next decade, with 700,000 people helped in the first year and this rising to 1.2 million per year by the tenth year of operation.

Between 25,000 and 50,000 of those helped each year will be individuals in mental health crisis treatment, according to the Government estimates.

See our Debt Help guide and free Mental Health & Debt booklet for more info on where to get help.

What is 'breathing space'?

The idea behind the 'breathing space' scheme – also known as a debt respite scheme – is to give people in problem debt a fixed period without fees, charges, interest or enforcement action, to allow them time to get on top of debts before they spiral out of control.

During this period, individuals will receive debt advice to help them find a long-term solution to their debts and get back on track with payments (though individuals receiving NHS treatment for mental health crisis will not need to seek debt advice during their treatment).

The Government had originally announced plans for a six-week breathing space in 2017 – but campaigners including Martin Lewis argued the respite should be longer, and it was later extended to 60 days.

What does the Government say?

Economic Secretary to the Treasury John Glen 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."

Phil Andrew, chief executive of debt charity StepChange, said: "We know that debt is bad for your mental health, with all the additional stress and anxiety that it can create. Around two in five people who turn to us have an additional vulnerability on top of their debt – and for half of them, that vulnerability is a mental health problem.

"However, the good news is that after debt advice many people report improvements in their wellbeing, such as being able to sleep better at night or cope better with day-to-day life.

"Breathing space will deliver much-needed additional help in two important and connected ways. It will encourage more people to seek advice, and when they do, there will be better protections in place to stop further harm and help recovery."