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HM Treasury's call for evidence: Breathing Space

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We're calling for a statutory Breathing Space scheme

We've produced evidence over the last few years on the need for a statutory Breathing Space scheme for people in problem debt. We have shown that the right support at the right time can help people regain control of their finances and repay their debts.

We have highlighted how the current legal protections offered through bankruptcy, individual voluntary arrangement (IVA) or debt relief order (DRO) solutions in England, Wales and Northern Ireland are only suitable for a minority of people seeking help with their debts.

The benefits of a breathing space scheme

We summarised the need for a Breathing Space scheme and a statutory debt management scheme and the benefits it could deliver. These include earlier access to debt advice, increased chances of recovery from financial difficulty and better support for people to repay their debts.

Improving the current proposals

The Conservative manifesto commitment described a Breathing Space scheme whereby a person may apply for protection from further interest, charges and enforcement action for a period of six weeks. There is also a commitment to follow this with a statutory debt management plan, where appropriate. We supported the government’s move to take this forward, and stressed the importance of putting such support in place as soon as possible, with clear commitments to its implementation.

However, our evidence suggests that to make the government’s Breathing Space scheme as effective as possible in achieving its goal of supporting people in problem debt and encouraging them to access debt advice earlier, it should include the following principles:

  • Eligibility for the scheme should be based on whether people can afford to pay debts as they fall due based on the assessment of a regulated debt adviser
  • A six week breathing space is helpful but there must be no gap in protection between starting the breathing space protection and setting up and completing a debt repayment plan
  • There needs to flexibility of repayments within the statutory debt management plan to allow for income fluctuations. All debts should normally be covered by the schemes, including government and local government debts. But certain debts should be prioritised in terms of payments within the scheme if not to do so would cause detriment to the individual, such as possible eviction.

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“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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