Providing breathing space for people struggling with debt
This briefing sets out the need for a new statutory ‘Breathing Space’ scheme to help people recover from financial difficulties and get their debt problems under control. It draws on research we carried out with help from 926 of our clients on their experiences of seeking help with problem debts.
Around four in ten of our clients surveyed for this briefing said that when they fell into financial difficulties, they were initially confident that they would get back on track quickly or manage by juggling bills and credit. Instead prolonged use of credit as a coping strategy tended to deepen the hardship and stress they experienced, creating further serious and lasting harm.
The government has now committed to introducing a Breathing Space scheme, alongside new ‘statutory debt repayment plans’, to help people repaying their debts.
In October 2018, the government published their plans for how these will work and released those for consultation. You can find out what we think of the proposals in our post-consultation briefing
Why we need breathing space
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.
Read our consultation response to HM Treasury's call for evidence
The problem with the current system
The problem is that people in England and Wales can only get a guarantee of protection from extra fees, interest and debt collection activities by entering into one of the existing statutory insolvency schemes. While insolvency schemes give vital help to people whose debt problems have already become intractable, they are not generally a suitable or accessible option for people in temporary financial difficulties who still have a good chance of bringing their debts under control given the time and support to recover.
We believe that the absence of an effective statutory ‘Breathing Space’ scheme protecting people in England, Wales and Norther Ireland before their debt problems become unmanageable is a significant public policy failure. Without that guarantee, people are not seeking help with their debts as quickly as they might and financial recovery is delayed.
Download the report now for the full picture.