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Tackling your debts

More breathing space for people in debt could be on the horizon

Posted 13 June 2017

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Both Labour and the Conservatives pledged more breathing space for those struggling with debts. We have a look at what could change for people struggling with debts, now we know the result of the election.

In their manifestos, both the Conservatives and Labour chose to focus on creating more ‘breathing space’ for people in debt. Now that we know the result of the election, let’s have a look at the proposals and what might change for those struggling with debt.


What counts as ‘breathing space’?


If you have repayments you can’t afford, you’ll know how stressful it can be.

Breathing space is designed to help relieve that stress by giving people in financial difficulties some time when lenders can’t contact them or add any extra interest or charges to what they owe.

There’s some debate around how long this period should last however, with some suggesting six weeks, but a major debt charity suggesting it should be extended to a year. The idea is that the time would help those with problem debt by giving them time to get their finances back on track, or to reach out for advice.


The government may decide to use the Families with Children and Young people in Debt Bill as the basis for the new legislation. This is was a Private Members Bill that was drafted by The Children’s Society and tabled in parliament earlier this year. Although it didn’t progress at the time, because the election was called, it could form the basis for the proposals when they go to consultation.


Would this affect all types of debts?


One key issue to be resolved is whether the breathing space would apply to all types of debt and all creditors. Whilst having extra time to deal with credit card, store card and loan providers is a good thing, some experts want the breathing space to apply to local and central government debt too. Local authorities use bailiffs the most, to collect things like unpaid council tax and parking tickets. And if you were overpaid tax credits, or you didn’t pay enough national insurance, HMRC might also use them to try and collect the money.


Why the focus on debt?


It’s not really surprising that both parties chose to focus on debt. The Bank of England has expressed its concern over a rapid increase in the amount households across the UK are borrowing using products like loans, overdrafts, credit cards and even car finance. Overall the amount of consumer debt tops £1.5 trillion.


What should you do if you’re struggling now?


It’s important to remember that nothing is set in stone as yet when it comes to these changes – and they could take many months to come into force. So what should you do if you’re drowning in debt right now?


The first thing to do is have a look at your budget. Take into account all the money coming in and going out of your household each month. See if you can cut back on non-essentials in order to free up enough money to make your repayments.


If there’s no way that you can afford your repayments, you need to seek expert debt help and stay in contact with your creditors. Make sure they know you intend to pay the debt back and see whether a debt solution can help you solve the problem.


Make sure you reach out as soon as you know you’re not able to make your repayments – getting debt help sooner rather than later can make a massive difference in stopping the situation escalating to the point where your creditors are trying to take you to court.

 

by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.