Debt affects millions of people in the UK, and for many families and people, the pandemic has only made things worse.
Factors that can push people include major life changes (many of which have occurred in the past year), discomfort, upkeep and maintenance, not being paid, living on low incomes, or having to buy new things .
If you stay awake at night thinking about your bank balance or if you have trouble avoiding panic attacks every time you take out your bills, you know you’re not alone. It is believed that around eight million people live in the UK debt problem.
A government plan, called Breathing Space, hopes to help thousands of people struggling with this debt. People who meet the requirements will be offered financial advice and will be given a respite for debt enforcement action for a period of 60 days.
As part of the scheme, which can help 700,000 people in England and Wales, people will receive free advice on debt to help them get started on the long but ultimately rewarding journey out of the black.
Previous investigations by the Monetary Advisory Service found that 65% of people receiving regulated debt advice paid off their debts or had repaid them in full within three to six months.
Having debt collectors have room to breathe is crucial to getting back on track, as StepChange’s charity research they found six out of ten people who were not protected against interests, charges and new enforcement actions He continued to earn even more credit for dealing with it.
What exactly is breathing space?
Breathing space is a free government scheme that aims to relieve some of the pressure related to your creditors, so you can focus on getting professional advice and getting out of debt.
The hope is that you will be able to set up with one debt settlement without worrying about being sued for payment or incurring additional charges. The scheme is not a paid holiday period, so you will need to continue paying your debts during that time (if you can afford to do so), but it will prevent action against you if you are unable to pay.
John Glen, the Treasury’s economic secretary, said of the launch: “This scheme will allow people to breathe in the sheriff’s charges, distressing letters and visits, so that they can meet their debt with the support of a professional debt advisor “.
Who is eligible?
You must live in England or Wales and you must have at least one qualified debt with a creditor. Most debts can be included in an agreement on breathing space.
However, there are some factors that may make you ineligible for the scheme. For example, you can only access the breathing space once in a twelve month period and you will not be eligible for requirements if you already have a Debt Relief Order (DRO) or an individual voluntary agreement (VAT). Nor should you be a bankrupt without discharge or be subject to a provisional order.
The best way to find out if you are eligible for the free plan is to hire a debt counseling service, which can apply on your behalf.
Even if you are not eligible, there may be other ways to get help, so it is always worth asking for professional advice. You can access free advice through Citizen service, charity Step change, the Monetary advisory service i National debt line.
I am eligible, now what?
You will go through the application process with a debt counselor. Once registered, the Insolvency Service will contact its creditors who will not be able to add interest or commissions to your debts or carry out enforcement actions for 60 days.
People using the plan are asked to: maintain regular payments (e.g., rent, mortgage, city taxes, insurance, and utility bills); continue to seek debt advice; and avoid getting more credit during the 60 days.
During the time you participate in the scheme, you will be in contact with a debt counselor who can help you overcome your debt. They will give you relevant advice for your situation and make you set up a suitable “debt solution”.
This could be one debt management plan (DMP), which helps you manage your debts by paying them off at a more affordable price; a debt relief order (DRO) that you see your debts amortized if you have a relatively low level of debt and few assets; or a individual voluntary agreement (VAT). The latter is a formal agreement that allows you to make affordable payments on your debts, usually for five or six years. At the end of the agreement, any unsecured debt is canceled.
Other options for managing debt
Create a monthly budget and stick to it. Find out what money goes into your account each month and what comes out: Are there any direct debits or standing orders that you can cancel to take a break?
If you have a lot of credit card debt, consider switching to one 0% balance transfer card so that you can rest from all the interest that was accumulating.
Talk to lenders or landlords about the possibility of paying a mortgage or a rent payment.
Find out how you can reduce your monthly bills – Often simply switching invoice providers for a more competitive rate can save you money in the long run. If you tell your existing supplier that you are buying, they may offer you a better deal to encourage you to stay.
Avoid rental schemes to buy on items such as appliances if you can, as you could end up paying four times what an item is worth. If you can’t afford to buy an item in advance, it’s worth finding out if other forms of credit can be cheaper in the long run.