New program launched to give people in debt a break

  • around 700,000 people struggling with debt will benefit from Breathing Space this year
  • The program will give people facing financial hardship 60 days to get their finances back on track – without accumulating debt, worrying letters or enforcement actions
  • people will also have access to professional debt advice, with stronger protections for those in mental health crisis treatment

Breathing Space will give people facing financial hardship a space to receive debt counseling or treatment for a mental health crisis, without pressure from creditors or increasing debt.

Under this program, people will enjoy legal protection from their creditors for 60 days, with most interest and penalties frozen and enforcement actions stopped. They will also receive professional debt advice to design a plan that will help them get their finances back on track.

And recognizing the link between problematic debt and mental health issues, these protections will be available to people in mental health crisis treatment – ​​for the full duration of their crisis treatment plus an additional 30 days.

People across England and Wales who are struggling to pay off their debts could be eligible, and the government expects 700,000 people to benefit in the first year of the scheme.

John Glen, Economic Secretary to the Treasury, said:

We’re committed to tackling debt issues, but it’s incredibly difficult to get your finances back on track when your debts are piling up and you have creditors at the door.

This program will give people respite from accusations, agonizing letters and visits from bailiffs, so they can tackle their debt problem with the help of a professional debt counsellor.

And to help people going through a mental health crisis, too often linked to financial problems, we are putting in place reinforced protections that last beyond the end of their crisis treatment.

Standard breathing space can be accessed by contacting a professional debt counselor. Since this may not be possible for someone in mental health crisis treatment, a licensed mental health professional can certify that they are receiving treatment and then a debt counseling provider can determine if they are eligible for the program.

The announcement builds on other recent government work to alleviate debt problems – and associated mental health issues – including the introduction of new rules to make letters of debt less threatening, funding for an interest-free loan pilot, maintaining record levels of Debt Advice funding for Money and Pensions Service in 2021-2022 and considering raising the financial threshold criteria for individuals to enter an order for debt relief.

The scheme is also expected to benefit creditors, with more than £400million in additional debt repayments expected in the first year of the scheme as people are helped to get their payments back on track.

Joanna Elson CBE, chief executive of Money Advice Trust, the charity that runs National Debtline and Business Debtline, said:

We are pleased to support the launch of the Breathing Space program, which is a major step in improving the help available to people struggling with debt. Breathing Space will provide a strong incentive for people in debt to seek free debt advice – with vital protections against interest, fees and creditor actions to give people the time and space they need to start coping to their financial difficulties.

Free debt advice has never been more important than helping households recover from the impact of Covid-19 – and Breathing Space will strengthen our ability to help people at this crucial time. We look forward to playing our part in making this program a success.

Martin Lewis, founder of and the Money and Mental Health Policy Institute, said:

Debt is more than just a financial problem. It’s a major cause of relationship breakdown, can dramatically diminish people’s well-being, and sadly leaves 100,000 people at risk of suicide. This is why Breathing Space is so important. It’s a win-win-win; for individuals getting their finances back on track, creditors who will get more money back in the long run, and the economy because there will be less financial catastrophe.

I’m especially thrilled that our suggestion from the Money and Mental Health Policy Institute for Recovery Space comes to fruition within this framework. This means that from now on, anyone receiving NHS crisis care for their mental health can recover without being harassed for escalating debt, fees and charges. Finally, people returning home after being hospitalized for their mental health can do so safely knowing that there is no threat or reality of ushers.

Phil Andrew, CEO of StepChange Debt Charity, said:

We’re excited to see Breathing Space online. Giving people the legal protection of a period of time to help them start settling their debts is a huge step up from the previous voluntary and one-sided approach. StepChange has been at the forefront of the campaign for Breathing Space since 2014, and we are delighted that the government considered our evidence and the experience of our customers when putting the program into practice.

This is the final piece of the safeguards puzzle for people struggling with debt, and more are on the way. Statutory debt repayment plans, when they come into effect, are designed to provide much-needed additional protections. We look forward to working closely with the Treasury to ensure their successful implementation.

Further information :

  • Most debts will qualify for respite, including credit and store cards; personal and payday loans; discovered; utility bills, rent and mortgage arrears; and government debts such as taxes and benefits.
  • Universal Credit overpayments will be included in the Breathing Space program from day one and Universal Credit advances and third-party deductions will be included on a phased basis as soon as possible after the policy begins.
  • Although interest and fees are frozen, a Breathing Space is not a payment holiday. People who enter breathing space will need to continue paying their outstanding debts and debts — like their mortgage, rent, and bills — while they work with a debt counselor to find a lasting debt solution. If someone in a standard breathing space fails to meet these obligations, a debt counselor has the discretion to cancel their breathing space.
  • The Insolvency Service is HMT’s delivery partner for Breathing Space – it has developed and will maintain an electronic service used by debt advisers to start, update and terminate Breathing Space. The Insolvency Service will send notifications to creditors and their agents regarding breathing space. It is also responsible for keeping a private register of people who are in a Breathability Space or whose Breathability Space has ended or been canceled within the last 15 months.

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