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Debt breathing space for people in England and Wales

23/07/2020

The UK Treasury has laid plans in the UK Parliament that will see people in England and Wales benefit from two new schemes to help protect them from debt from next year.

The new schemes, known as moratoriums, are intended to help people in England and Wales who are struggling with problem debts and, importantly, will also provide them with important protection from bailiffs and enforcement agents, whilst freezing any interest and charges being applied to their debts.

The protections, however, will not just stop there, and will also mean that even mortgage and rent arrears can be included in the schemes and mortgage providers and landlords will not be able to proceed with action to repossess a home or evict a tenant whilst a debt moratorium is active.

In addition, gas and electricity providers will also be prevented from disconnecting supplies or even installing pre-payment meters whilst a scheme is in place.

The new debt respite schemes are believed to be the first step in introducing several different levels of support that it is believed will copy a similar scheme that already exists in Scotland and has been tried and tested.

The new schemes, however, will only be available to those who live in England and Wales but are expected to go further than the Scottish Scheme and will offer greater levels of protection for those in debt.

Importantly, they will also ensure that whilst someone is in the Scheme, their Creditors cannot rely on any missed payments to put a debt into default.

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Breathing Space

The first scheme which is being launched will be known as Breathing Space and will be available to anyone living in England and Wales, providing they can show they are not able to repay their debts.

To apply, someone will have to do so through an approved Debt Advice Agency, that will check their eligibility.

This will include ensuring that they cannot repay their debts as they fall due.

Once approved, however, the scheme will then provide the person with 60 days protection from their creditors, but importantly will also provide the person with important breathing space during those 60 days to get further advice on all their options, including Individual Voluntary Arrangements and other solutions for dealing with over-indebtedness.

During the scheme, however, the person will be required to engage with their debt adviser and work with them to find a long-term solution to their problems.

 

Mental Health Crisis

The second scheme will be known as Mental Health Crisis Moratorium and is specifically intended for people who are suffering a severe mental health crisis. To apply, however, someone must be receiving treatment from a mental health professional.

The scheme, like with the Breathing Space, offers protection from bailiffs and enforcement agents and stops creditors applying interest, fees, penalties, and charges to debts whilst the person is in the Scheme.

Importantly, however, the application to the debt advice agency does not need to come from the person themself but can be made by the mental health professional or a social worker who is supporting them.

The protection also continues for not just 60 days, but until their treatment ends and then another 30 days after that, meaning the person will be able to take advice before deciding themselves how to deal with their debts.

 

What debts can be included?

The schemes will allow most debts to be included, including credit card and personal loans, but also council tax arrears, mortgage and rent arrears and arrears on gas and electricity bills.

Other debts, however, will remain excluded, or non-eligible, including student loans, child maintenance arrears and debts that arise out of fraudulent activity.

During the moratorium period, lenders will not be able to take any enforcement action to recover debts, but where they suspect that someone who has applied is ineligible, they will be able to request the debt advisor carries out a review of the moratorium and ultimately if they believe the person should not have made the application, will be able to apply to the courts to have the moratorium cancelled.

Lenders will also be allowed to request the court allows them to carry out certain enforcement action but this will not include adding interest and charges to the debt.  If it can be shown, however, that this will be detrimental to the person in debt, it will be possible to argue the creditor should not have such powers.

It is expected the new England and Wales Schemes will be launched on May 4, 2021. It is anticipated a similar scheme will then be launched for people in Northern Ireland.

If you are struggling with problem debt and would like to speak freely with a Creditfix debt advisor for advice about the best debt relief solution to suit your, call 0808 253 2540

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