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In recent years, debt charities have called on the government to give all those in problem debt a “breathing space” when seeking regulated debt advice. They have argued variously that where people in financial difficulty “do the right thing” and engage with their creditors, make affordable offers of payment and maintain regular payments, they should be protected from debt enforcement. 

The implementation of a statutory breathing space and debt repayment plan was a 2017 manifesto commitment. The aim being to give people in problem debt the opportunity to take control of their finances and put them on a sustainable footing. The Treasury ’s Breathing space: call for evidence ran from 14 October 2017 to 16 January 2018.

On 29 October 2018, alongside the Autumn Budget, the Treasury published a consultation on its policy proposal. In its response, published on 19 June 2019, the Treasury confirmed that it would be taking forward its proposal and outlined how “the scheme” would be designed, funded and administered.

Individuals in serious debt would be given a breathing space of 60 days provided they agree to seek help from a professional debt adviser. During this breathing space, interest, default fees and charges would not accrue. Creditors would also be prevented from taking any enforcement, collection or recovery action and any ongoing enforcement action would be paused. The breathing space would apply to a wide range of debts including, council tax and benefit repayments. Importantly, people seeking help for a mental illness would benefit from an alternative access mechanism to breathing space and a longer period of protection for the duration of their treatment.

A statutory debt repayment plan (DRP) would enable someone in problem debt to enter a statutory agreement with their creditors to repay their debts in full over a reasonable timeframe (in exceptional cases, a DRP could last for more than 7 years for vulnerable debtors on low incomes but cannot extend beyond 10 years). Individuals entering a DRP would receive legal protections from creditor enforcement action for the duration of their plan and relief from interest and charges.

The two interventions should be viewed separately. A debtor would be able to enter a breathing space without then entering a DRP. A debtor would also be able to enter a DRP without having first entered a breathing space.

In its response the Treasury said that that before the end of 2019 the government would lay before Parliament new regulations with the intention of implementing a statutory breathing space in early 2021. A statutory DRP would be developed to a longer timetable. Implementation of both a statutory breathing space and DRP would complement the government’s wider work to support consumers who take on debt.

This briefing paper considers the scheme in detail. It should be noted that the proposed new debt measures would extend only to England and Wales. The current Scottish Debt Arrangement Scheme already provides debtors with a short breathing space and statutory repayment plan.

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