The Government is to table legislation that will prevent lenders and debt collectors from pursuing consumers with serious debt problems during a 60-day period. In addition, the interest and charges on the debt must also be frozen during these 60 days; and firms will not be able to apply for court orders relating to enforcement of the debt.
In addition to loan and credit card debts, council tax arrears, unpaid personal tax, utilities arrears and benefit overpayments are also covered by the proposed legislation, which is expected to become law sometime next year.
In return for being protected from enforcement action, the affected individuals will be expected to seek professional debt advice during the two-month breathing space period. During this time their adviser might, for example, recommend that the borrower enters into a debt management plan.
Borrowers experiencing mental health issues will be granted a breathing space period that will only end when they stop receiving medical treatment for their condition. For anyone with mental health issues, there will also be no requirement to seek professional debt advice.
The Treasury estimates that the new legislation will assist at least 700,000 borrowers each year, with at least 25,000 of these individuals benefitting from the special mental health provisions. By the end of the decade, the Government believes that the breathing space scheme will assist 1.2 million UK adults.
Economic Secretary to the Treasury, John Glen MP, said:
“Being trapped in debt can be an incredibly difficult experience, and with interest and potential enforcement action to contend with, it’s no surprise how stressful the impact can be.
“Today’s figures underline just how critical it is that we roll out this policy, particularly on a day like today, where we should all work to reduce the stigma of mental health issues.
“That’s why we will introduce breathing space in early 2021 as planned, so we can level up the whole country and help millions of people to rid themselves of problem debt.”
Helen Undy, chief executive of the Money and Mental Health Policy Institute, welcomed the special provisions for anyone with a mental health issue, and added:
“This scheme could genuinely save lives. Everyone experiencing a mental health crisis should have the opportunity to recover free from escalating debt fees, charges and the threat of bailiffs arriving at their door. We are delighted that the government acted on our call to protect people from being hassled about debts while they’re receiving crisis care, and we look forward to working with ministers to put these plans in place over the coming year.”
Recent data has also shown that the numbers of County Court Judgements are rising, as are the numbers entering an Individual Voluntary Arrangement.
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