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The government is introducing a new Breathing Space scheme to protect individuals with problem debt, with those in mental health crisis to get further protections while they receive treatment.
Individuals and families struggling with problem debt will be given extra help and time to get their finances under control, City Minister John Glen has announced.
The new plans will see the introduction of a 60-day Breathing Space period from 2021, where people with problem debts will be protected from enforcement action from creditors and will see their interest frozen.
During this period, individuals are obliged to engage with professional debt advisers, with the aim to find a long-term solution to their debts and get back on track with payments.
As part of these plans, and to acknowledge the links between problem debt and mental health issues, the government has also confirmed that individuals receiving NHS treatment for mental health crisis will not need to seek debt advice during the 60-day period.
"Problem debt can have a devastating impact of people’s lives, putting a huge burden on individuals which can lead to family breakdown, stress and mental health issues," said Mr Glen.
"No one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors. That’s why I’m introducing this new scheme, giving everyone access to the advice, time and support they need to both get their finances under control and get away from the perpetual stress and worry debt can cause."
Helen Undy, chief executive of the Money and Mental Health Policy Institute, explained that the 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," Ms Undy added.
Joanna Elson, OBE, chief executive of the Money Advice Trust, the charity that runs National Debtline, also praised Mr Glen's announcement.
She said it will provide a powerful incentive for people to seek debt advice, safe in the knowledge they will be given the time and statutory protections they need to begin to resolve their financial difficulty.
"The decision to include local authorities and other public sector creditors is particularly welcome – and means this new scheme could well be a game-changer in our efforts to tackle problem debt as a society," confirmed Ms Elson.
Crucially, the scheme will cover a broad range of debts including arrears owed to central and local government. This will mean council tax arrears, personal tax debts and benefit overpayments will be included.
As well as Breathing Space and the support for those in mental health crisis, the package also includes a Statutory Debt Repayment Plan for those with problem debt, which offers similar protection to the Breathing Space scheme, helping individuals to repay their debts over a manageable time frame.