Breathing Space and Statutory Debt Management Plans

Posted 27 November 2018

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New legal powers to help people deal with problem debt (coming soon…)

Did you follow the news about last month’s Budget? If so, you might have heard that the Chancellor put forward proposals to help people struggling with serious debt. These included a breathing space period, and a statutory debt repayment plan. What do these measures mean? And could they help you? Read on for everything you need to know.

What are the proposals?

Breathing space

Breathing space is a period of time in which your lenders basically leave you alone, without taking any action against you or adding interest or charges to your debt. The government proposes that this period should last for 60 days.

How will it work? Well, when someone with problem debt seeks debt advice from an authorised debt advice provider like us, that provider will write to your lenders and ask them to agree to a period of breathing space.

As the name suggests, this is to give you time to ‘breathe’. What does that mean in practice? You’ll have:

  • a break from the stress of dealing with your debts
  • time to figure out what your next step should be
  • peace of mind while your debt advisor helps you get a debt solution set up, if that is appropriate for you.

Statutory Debt Repayment Plan

The Chancellor also proposed to create a legally binding form of Debt Management Plan in England and Wales. This would bring these parts of the UK into broadly into line with how Debt Arrangement Schemes (DAS) already work in Scotland.

The new scheme would work in pretty much the same way as existing debt management plans, except that creditors - including local authorities, if you have council tax debts - would be legally obliged to accept your payments, stop taking action against you, and freeze interest and charges for as long as you were making payments (up to a maximum of 10 years).

What happens now?

The government’s proposals are still under consultation, and won’t come into effect until next year at the very earliest. So what should you do if you’re struggling with debts now?

If you can’t afford to pay your debts – don’t wait until next year, but also don’t panic. There is a range of different debt solutions available now that might be able to help you. However bad you think your debts are, there is always a solution. You can see what options may be suitable for you here. Alternatively, the Money Advice Service also has information on the debt solutions open to you.

by Christine Walsh

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