Brits who are struggling with debts can get help through a new “breathing space” scheme launching today.
The financial support will see borrowers protected against debt collectors and bailiffs for 60 days.
But in order to get the help, you must agree to work with experts to sort out a long-term plan to get you out of debt.
You must also keep up with your debt repayments where possible.
If you’re being treated for a mental health crisis, your “breathing space” period will last as long as you’re receiving treatment, plus 30 days.
Debts that will be covered through the scheme include credit cards, personal loans, overdrafts, utility bills and mortgage and rent arrears.
Have you managed to clear your debt? Tell us how you did it: mirror.money.saving@mirror.co.uk
The new “breathing space” scheme comes as household finances continue to be hit by the coronavirus crisis.
Devastating figures show how 813,000 jobs have been lost since the start of pandemic.
The total number of Brits out of work now stands at 1.67million, reports the Office for National Statistics (ONS).
What is the ‘breathing space’ debt help scheme?
Put simply, the “breathing space” scheme will give those in debt temporary protection while they get on top of their money issues.
It will start officially from May 4 for families in England and Wales.
If you qualify for “breathing space” under the regular scheme, you will be protected against prosecution, debt collectors and bailiffs for 60 days.
Interest and other fees won’t be added to your debt as well during this period.
But during this time, you must get professional help to get yourself out of debt and not take out any new borrowing over £500.
You must also keep up with your debt repayments where possible during your "breathing space" and continue to make your other regular payments, including ongoing housing costs, utility bills, and taxes.
For the mental health part of the scheme, the protection from debt collectors and prosecution will last as long as you’re receiving treatment, plus 30 days.
You won’t be expected to get debt advice while you’re being treated.
The government estimates around 700,000 people struggling with problem debt will benefit from "breathing space" this year.
Which debts are covered and which ones aren’t?
According to the official Gov.uk webpage for the scheme, most debts are likely to qualify for the support. These will include:
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Credit cards
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Store cards
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Personal loans
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Pay day loans
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Overdrafts
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Utility bill arrears
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Mortgage or rent arrears
Government debts like tax and benefit debts are also likely to be eligible - if you’re unsure, speak to a debt expert.
But keep in mind that not all debts are covered by the scheme. This includes:
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Secured debts
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Debts incurred after your breathing space started
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Debts from fraud
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Court fines (but penalty charge notices like parking tickets apply)
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Child maintenance debts or money owed under an order from family court proceedings
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Debts from a confiscation order
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A crisis or budgeting loan
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Student loans
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Advance payments of Universal Credit
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Council tax debts that are not due yet
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Personal injury damages
How do I apply for ‘breathing space’?
To apply for help through the scheme, you’ll need to speak to a debt advisor who will help you with the process.
Organisations like Citizens Advice, StepChange or the National Debtline will be able to help you for free - don’t be tempted to pay a debt firm for their advice.
If you’re eligible for the scheme, their debt advisers will submit the application on your behalf to the Insolvency Service.
Under the regular part of the “breathing space” support, you can only apply for a break once every 12 months.
You can apply for the mental health crisis type of “breathing space” more than once a year.
Joint debts can be included in a breathing space, even if only one person applies for the support.
Those who have a debt relief order, individual voluntary arrangement or have filed for bankruptcy also cannot apply for the support.
Again, if you are unsure, speak to an expert to see what help is available to you.
John Glen, Economic Secretary to the Treasury, said: “We’re determined to tackle problem debt, but 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.
“This 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.”
Martin Lewis, founder of Money Saving Expert, said: “Debt is far more than just a financial issue. It’s a major cause of relationship breakdown, can hugely diminish people’s well-being, and sadly leaves 100,000s at risk of taking their own lives.
“That’s why Breathing Space is so important. It’s a win-win-win; for individuals who get their finances back on track, creditors who’ll recoup more cash in the long run, and the economy as there will be less financial catastrophe.”
Lorraine Charlton, debt expert at Citizens Advice, said: “If you have unmanageable debts, the new scheme could give you the time to get the advice that will help, and to start taking action.
“Breathing Space isn’t a temporary fix to simply keep your creditors at arm’s length. You’ll need to work with your debt adviser to try and make a plan to deal with your debts.”
