Britons with mounting debt will be able to demand a two-month hold after proposals in the pipeline for two years came into effect today.
The so-called ‘Breathing Space’ plan, announced in 2019 after a five-year campaign by debt charities, would allow debtors to apply for a break from any enforcement action from creditors and freeze interest and fees.
A 60-day standstill on credit escalation and the threat of debt collectors being sent in is supposed to give borrowers an opportunity to determine their financial situation and options that can help them get out of debt.

Hit the red button: New government ‘breathing space’ scheme gives those with debt problems a 60-day break from interest, fees and enforcement action
Potential applicants can ask a debt counselor or charity to stop the clock, provided they meet the criteria. They must not be under a debt relief order or have an individual voluntary arrangement or be bankrupt when the application is made.
Meanwhile, not all debts are included, even if all creditors are told someone can’t make their payments for two months, which can hurt their credit score.
That’s because unlike the three-month mortgage and credit card payment holidays introduced by the Financial Conduct Authority last year, this 60-day break will show up in credit filings.
Among the debts not included in any arrangement are secured loans such as mortgages or second mortgage loans, or an advance on universal credit payments due to the Department for Work and Pensions.
Those using the scheme are also expected to continue making housing, council tax and utility payments within the two-month breathing period, and it can be canceled if they do not.
The Treasury has estimated that up to 700,000 people could benefit from the scheme in its first year of operation.
It can ‘help people develop an affordable long-term plan so they don’t have to rely on quick fixes or high-cost credit,’ minister John Glynn wrote in a blog post for debt charity StepChange in February 2020. ”
The introduction comes as the number of British adults in bad debt hit 2.4m in January, thanks to the pandemic, according to figures from StepChange. About 14.3 million people have seen income decrease due to the coronavirus, of whom 11.3 million said their income has not recovered.
The charity’s chief executive, Phil Andrew, described the move as “landmark legislation” with “real potential” to “help put people seeking debt advice on a path to recovery”.
He added, “It is very welcome that people who take action to deal with their debts are finally getting the legal protections that hitherto have been only voluntary and provided by some, but not all, individual creditors.”
The 60-day freeze is the first in a two-part government proposal, included in the Conservative Party’s 2017 election manifesto, to try to help people struggling with their debt.
It will be followed by a “statutory debt repayment scheme” in 2024 which will enable debtors to enter into a legally binding agreement to pay off their debts.
It also follows an announcement in the March 3 budget that the government would allocate £3.8m to pilot an Australian-style zero-interest loan scheme for die-hard borrowers.
Community lenders and charities have cautiously welcomed the move, although they said questions remain about how it will work.
Some have also raised concerns about the new system’s effectiveness given its limited run time, and the fact that debt counselors can often get hold of credit card debt and loans outstanding for a similar period of time already.
Debt counselors wanted the scheme to be six or 12 months long, Sarah Williams, a debt counselor who runs the Debt Camel blog, told This is Money.
This would have given enough time for many people to be able to find another job or settle their priority debt payments.
“But the current two-month breathing space is not long enough to be useful in many cases.”
Amy Taylor, debt counselor and head of Greater Manchester Financial Advice Group, said: ‘If part of our advice is that a customer can claim benefits, it is likely that it will take much longer than 60 days before they see any improvement in income – for disability benefits it is The date range is currently about six months.
There are other issues, such as changing the dynamic between client and debt counselor. We exist to provide independent advice, representation and information, but they do impose obligations on debt advisors and clients.
There needs to be regular interaction from the client, they are supposed to keep paying their bills, they shouldn’t borrow more than £500 and if they don’t meet these conditions debt counselors can effectively end their breathing period.
“This is not how I operate as a debt counselor and I feel this is damaging to the trust on which the counselor/client relationship depends.”
She added: ‘There may be nothing different in the client’s circumstances at the end of the scheme and no particular debt solution to go to. Breathing space is not a debt solution in and of itself. It’s just a pause.
Williams added: “A lot of people who talk to a debt counselor about a two-month break may find that the debt counselor indicates they have better options. There may be a good debt solution that you can start right away.”
“Or it may just be necessary to speak to one or two creditors and demand that your account be suspended while you get back on your feet.”
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