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New help for millions in debt crisis - you can now get two months' 'breathing space' from interest and enforcement action

New rules giving those in England and Wales who are struggling with problem debt a two-month grace period to get their finances back under control come into force today, in a huge victory for and others who've campaigned hard on the issue.   

From today, those struggling with serious debt can get 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, they can get a longer grace period, dubbed a 'recovery space', which lasts as long as their treatment plus a further 30 days. In both scenarios you need to ask for this help though – it's not automatic. 

The Government's impact assessment estimated that millions will benefit from breathing space over the next decade, with 700,000 people helped in the first year, rising to 1.2 million per year by the tenth year of operation. Between 25,000 and 50,000 of those helped each year are expected to be individuals in mental health crisis treatment. 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. In 2016, both Martin and debt help charity StepChange issued a joint statement calling for the help to be introduced. For more on where to get help, see our Debt Help guide and free Mental Health & Debt booklet.

'A win for individuals, creditors and the economy'

Martin Lewis, founder of 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. That’s why it’s a delight to see this scheme introduced, after long campaigning, as it will truly save lives.

“It’s a win-win-win. A win for individuals as the breathing space will give them time to get their finances back on track and start to sort their debt. A win for creditors who will usually end up getting repaid more in the long run. And a win for the economy, as it means less catastrophic finances and mental health impact.

“I’m especially thrilled that our Money and Mental Health Policy Institute suggestion for 'recovery space' is coming into fruition as part of this. That means from now on, everyone receiving NHS crisis care for their mental health can recover without being hassled for escalating debt, fees and charges. Finally, people returning home after being hospitalised for their mental health, an extremely anxious and depressing time, can do it safe in the knowledge there’s no threat or reality of bailiffs knocking.”

How 'breathing space' works

Here are the key need-to-knows about how the breathing space rules will work in practice:

  • During a breathing space, you WON'T be charged additional interest or fees of any kind. In addition, those you owe the money to are not allowed to backdate any interest or fees after the breathing space ends.

  • During a breathing space, all enforcement action MUST stop. This means that those you owe the money to are not allowed to:
    - force you to pay the debt
    - contact you about enforcing the debt (except where this is required by other laws)
    - apply to the Department for Work and Pensions for deductions to be taken from your benefit payments to recover the debt
    - sell or take control of your property or goods
    - start any action or legal proceedings against you
    - disconnect your gas/electricity or try to install a prepay meter to recover energy debt.

  • Most debts are covered – but not all. You can only get a breathing space on certain 'qualifying debts', including:
    - credit/store cards
    - personal loans
    - payday loans
    - overdrafts
    - utility bill arrears
    - mortgage or rent arrears
    - council tax arrears

    However, breathing spaces don't cover secured debts (eg, mortgages, car hire purchase agreements), any debts incurred through fraud, any liabilities to pay fines imposed by a court for an offence and some other kinds of debt.

  • A standard breathing space lasts for up to 60 days. It could end sooner than this if a debt adviser or a court cancels it. A breathing space for someone getting treatment for a mental health crisis could last longer, as it covers the period during which you're being treated (no matter how long this lasts), plus 30 days.

  • You can only get a breathing space once every 12 months. To be eligible for a standard breathing space, you can't already have a breathing space and can't have had one in the last 12 months. But this limit does not apply if you had or need a breathing space and you're getting mental health crisis treatment – you can enter a mental health crisis breathing space as many times as needed.

  • If you can, you still need to make certain payments during a breathing space. While firms you owe money to can't enforce the debt during a breathing space, or charge interest or fees, you're still legally required to pay what you owe, and creditors can continue to accept these payments, including those you may make through existing direct debits. So don't think of the breathing space as a payment holiday. Instead, it's to give you the opportunity to get a handle on your finances without scary letters and big fees piling up.

    Where possible, you must also keep paying any 'ongoing liabilities' – these are any payments you need to make for:
    - your mortgage or rent (though not any mortgage/rent arrears accrued prior to the breathing space)
    - any insurance agreement
    - any taxes, including local taxes/rates for local authorities (eg, council tax), duties and national insurance contributions
    - utility bills

    If you don't pay these, the debt advisor may cancel the breathing space (unless you're being treated or have recently completed treatment for a mental health crisis).

How to ask for breathing space to help you get on top of your debts

If you're consistently struggling with debts and having problems meeting repayments, you may be eligible for breathing space. Here's what you need to know:

  • You can't apply for breathing space directly – you can only get it via debt help services, such as charities, certain local councils and commercial debt advice companies, so ask. It's important to note that you can't apply for breathing space on your own – it can only be started by a professional debt advisor or your local council (if it provides debt advice to its residents).

    - If you're already seeing a debt advisor, they should be able to help you apply – though they'll first need to assess whether breathing space is the most appropriate solution to help. If in doubt, it's worth asking them if it is right for you.

    - If you're not already seeing a debt advisor or they can't help, contact a debt help charity. Good options to try include Citizens AdviceStepChangeNational Debtline and CAP but there are others – our Free debt advice guide has a longer list.

    As we've often said before, it's important to be careful when looking for debt advice – the aim is to find non-profit debt counselling help from someone paid to help you, not make money out of you. Debt help, loan consolidation, IVA and debt-wiping companies that advertise on TV or online are therefore usually best avoided. For more information on what to look for, and what to avoid, see our Debt Help guide.

  • If you're getting treatment for a mental health crisis, ask a mental health professional about breathing space. They can apply on your behalf if it's appropriate for you. Others such as carers, mental health nurses and social workers can also apply for you, but to do so they'll need a mental health professional to confirm that you're receiving crisis treatment.

In Scotland and Northern Ireland, the rules are different

The provisions coming into force today are for those living in England and Wales. Scotland has similar rules in place under its Debt Arrangement Scheme, which you can access via a debt advisor. See the Citizens Advice Scotland website for full details.

Sadly Northern Ireland (NI) doesn't yet have a legal scheme in place like the rest of the UK. However, debt help charities can still ask your creditors to give you breathing space - see the Advice NI website for more information.

A spokesperson for the NI Department for Communities told us: "The communities minister has asked officials to explore bringing forward primary legislation in the next NI Assembly mandate, to facilitate the implementation of a debt respite scheme, which is expected to include a 'breathing space' element for Northern Ireland."

What the Government and StepChange say

John Glen, economic secretary to the Treasury, said: "This scheme will give people a breathing space from charges, distressing letters and bailiff visits, so they can tackle their problem debt with support from a professional debt advisor."

Phil Andrew, chief executive of StepChange debt charity, added: "Giving people the statutory protection of a time period to help them begin to deal with their debts is a huge step up from the previous voluntary, patchy approach." 

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