Two-month ‘breathing space’ scheme to help those in serious debt
The concept of implementing a period of ‘breathing space’ for those with serious issues around debt has been discussed for a long time, but it has now been announced that from 2021, it will officially come into effect in the UK.
The 60-day stretch will give those people that are having financial issues enough time to minimise their debts or, if possible, eradicate them entirely, without having to face any form of reprimand. The Government has confirmed that during this spell of time people with debt will not be approached by bailiffs or people whose profession is to collect outstanding debts (generally debt collectors or debt recovery agents).
In essence, their debts will be frozen for this period.
Of course, people are not simply going to be given a two-month period of freedom; there are obligations and rules around the ruling. The Government has stated that during this time, those people with serious debts will have to confirm that they are working with an independent financial advisor or debt advisor, and must showcase at the end of the period that they have a viable means of reducing the amount of money they owe.
The Government has also confirmed that it will provide each of those affected by the scheme with a ‘debt repayment plan’ that aims to get the money repaid in a ‘reasonable period of time’. The plan will subsequently adjust as life circumstances – income, for example – alter, which means that a personal change will not hamper someone’s ability to make repayments.
The reasons behind the scheme
Household debt in the UK has reached new heights in recent months, and many charities and individuals alike have called for something to be done to help those in the greatest need.
According to a report published by the Guardian at the start of 2019 [https://www.theguardian.com/business/2019/jan/07/average-uk-household-debt-now-stands-at-record-15400], the average UK household now has around £15,400-worth of debt, which is a record figure. At the time the TUC regarded this as ‘crisis levels’ of debt and suggested that many households are struggling to survive day by day.
As well as calls for the breathing space scheme to be introduced, many people have also called for zero-hours contracts to be eradicated, while others have suggested that the minimum wage should be increased. It is unclear, however, what will happen with these other suggestions.
If you are a company that is looking to recover a debt, get in touch with us to discover more about the options that are available to you.