Millions of people can get two-month ‘breathing space’ through debt next week – see if you apply
Cash-strapped Britons will be able to request a 60-day “respite” period from debt thanks to a new program launched next week.
Millions of people with debt problems, including those with mental health issues, will be able to apply for a “Mental Health Crisis Debt Relief and Breathing Space Program”.
The government initiative was set up to help people take control of their finances.
A two-month respite will see the end of enforcement actions by creditors and the freeze of interest for people with debt problems.
During this period, individuals will receive professional debt advice to find a long-term solution to their financial difficulties.
Additionally, those who receive treatment for a mental health crisis will receive the same protections until their treatment is completed, in recognition of the obvious impact debt can have on well-being.
The government has said the program will help more than 700,000 people across the UK get professional help in its first year, growing to 1.2 million per year by the tenth year of operation.
Scroll below for more information and to find out if you are eligible.
Breathing Space explained
The Breathing Space program will give a person in difficulty the right to legal protections from their creditors.
Ultimately, this gives people temporary protection against most types of debt collection while they take steps to pay off their debts.
You can apply through a debt counselor for a sixty day breathing space.
You should continue to engage with your debt counselor and not take out any new loans over £ 500 during this time.
You will also need to continue to make certain types of payments, including current housing costs, utility bills, and taxes.
Interest and charges will be suspended on debts included in Breathing Space as long as these conditions are met – you can only apply for Breathing Space once every 12 months.
Lorraine Charlton, Debt Expert at Advice to citizens, Said: “The coronavirus pandemic has had a huge impact on the finances of many people, with millions of people falling behind on essential bills and falling into debt.
“With the end of temporary debt protections, we fear that the real struggle will start soon for many.
“If you are in debt that’s out of control, the new system may give you time to get the advice that will help you and start taking action.
“Breathing Space is not a temporary solution to just keep your creditors at bay. You will need to work with your debt counselor to try and make a plan for dealing with your debts.
“For anyone who feels they can’t manage their debt, the most important thing is to seek help as soon as possible from a free, impartial debt counseling charity like Citizens Advice.”
Mental health and debt
For those with mental health issues who are being treated for a mental health crisis, a separate plan will apply.
The government says for the initiative to apply, a licensed mental health professional will need to confirm that you are receiving crisis care.
Your GP cannot make this confirmation, but should be able to refer you to someone who can.
You can then seek help from the program yourself, or someone else – such as a caregiver, social worker, or mental health nurse – could apply on your behalf.
The break on the app lasts as long as you receive crisis treatment, plus 30 days.
A designated person will need to stay in contact with your debt counselor to inform them of your ongoing treatment.
You can request this type of breathing space more than once a year.
If you still need more time to settle your debts after your crisis treatment is over, you can always apply for a Standard Breathing Space afterwards.
It is estimated that 25,000 to 50,000 people receiving treatment for mental health crises should receive respite each year.
Am I eligible?
People living in England and Wales will be eligible for both schemes.
You can only apply if you are not currently in another formal debt solution – such as a Debt Relief Order, Individual Voluntary Arrangement, or Bankruptcy.
You will also need to have at least one qualifying debt.
Advice to citizens explains that these eligible debts are quite large and include items such as credit cards, personal loans or overdrafts.
Many priority debts, such as rent arrears, fuel arrears and housing tax arrears will also be eligible.
Some debt will not qualify for Breathing Space – these include court fines, universal credit prepayments, and student loans.
Secured debts such as mortgages or auto financing will not be eligible unless you have been in arrears on your payments.
Your debt advisor will ultimately advise you on whether Breathing Space is right for you as you identify a longer-term debt solution.
“The most common types of problematic debt would be eligible debt in Breathing Space,” Lorraine added.
“This includes senior debts – like rent arrears or house tax debt – which can have particularly serious consequences when you can’t pay them.
“Your debt counselor will work with you to find the best way forward.
“This may involve asking Breathing Space to save time while you choose the right debt solution for your situation.”
How to register
Debtors can only find respite by seeking debt advice from a debt counselor.
Although all requests should be considered, the debt counselor may decide that a respite is not appropriate for a debtor.
To apply, a debtor must provide their debt advisor with:
- last name and first name
- Date of Birth
- usual residential address (in some very limited circumstances this address may be removed from the breathing space register and any notification to creditors)
- details of the debts they owe, including the type of debt they owe
- the name and contact details of the creditor
- if applicable and known, the name and contact details of any representative appointed by the creditor
If the debtor is an individual entrepreneur and has trade debts to include, he must also provide:
- their trade name (s)
- any business address
To apply from May 4 and for more information visit the government website here.