Why is this important?
The aim of providing this breathing space is to give debtors up to six weeks to fully assess their situation without undue external pressure from their creditors and seek professional debt advice earlier in the process. They will also be exempt from further interest charges and enforcement action during this period.
Breathing space is being introduced as part of the Financial Guidance and Claims Act which became law in 2018 and covers amongst other areas, giving appropriate guidance for pension scheme members and outlawing unsolicited pensions marketing and legal charges for PPI claimants.
Official consultation ended in January 2019 for laying out a system where The Insolvency Service would provide a register for people using breathing space. There is also parallel legislation being introduced to provide statutory debt repayment plans which will allow people to repay their debts in a manageable way over an extended period with legal protection, similar to the existing Debt Arrangement Scheme in Scotland.
HM Treasury said: “The government will analyse responses to this consultation, and respond in due course, setting out next steps on the scheme’s implementation in that response, including on the laying of regulations to establish the scheme.”
Adrian Hyde, president of insolvency practitioners trade organisation R3, said: “Introducing a breathing space would benefit everyone involved: both the indebted individual and their creditors. If people find it easier to access a debt solution that suits their situation, they can repay more money to creditors and get back on their feet much quicker, no longer burdened by debt.”
The scheme is expected to become law sometime in 2019.
You can find more information on insolvency and administration matters in our fully up-to-date online glossary.