The Treasury says the scheme will give people a breathing space from charges, distressing letters and bailiff visits, so they can tackle their problem debt with support from a professional debt advisor.
A new scheme to give people in problem debt 60 days of ‘breathing space’ has been launched.
While the pandemic has prompted many to save or invest more, others have seen increasing financial pressure from redundancy, lower employment prospects and a rising cost of living. The UK Treasury says about 700,000 people in the UK currently struggling with problem debt are set to benefit from the new scheme.
As well as a break from their debts and creditors, including the freezing of interest and penalties, people will also have access to professional debt advice, with stronger protections for those in mental health crisis treatment
John Glen, Economic Secretary to the Treasury, says the government is "determined" to tackle problem debt, but that it "is incredibly hard to get your finances back on track when your debts are piling up and you’ve got creditors at the door."
The scheme, he adds, will give people a breathing space from charges, distressing letters and bailiff visits, so they can tackle their problem debt with support from a professional debt advisor. As well it will help people going through a mental health crisis, which is too often linked to financial problems.
"We’re bringing in stronger protections lasting beyond the end of their crisis treatment.”
Phil Andrew, CEO of StepChange Debt Charity, which has campaigned for such as scheme since 2014, said:
“This is the latest piece in the jigsaw of safeguards for people experiencing problem debt, with more to come. Statutory Debt Repayment Plans, when they come into being, are set to give further, much-needed protections."
Dave Heathcote, Insolvency Director at TDX Group, is less optimistic saying while it is an important step in how society manages problem debt, its impact will be limited in cushioning against the potential wall of debt many will face down the line.
“Against the backdrop of increasingly positive news on the UK’s vaccination roll out and a potential return to normality, a more sombre and fuller picture of the pandemic’s financial impact will emerge as government support schemes and forbearance winds down.”