Millions of Brits in debt could get two month ‘breathing space’ next week

Millions of Brits who are in debt could get a 60 day break from prosecution, debt collectors and bailiffs from next week.

People across England and Wales can apply for the two-month “breathing space” from May 4.

The Debt Respite Scheme is designed with the intention of letting people have time to find long-term debt help.

And, the scheme, which was first announced in 2019, covers a number of debts including personal tax debt, benefits overpayments, credit cards, loans and council tax arrears.

During the pandemic, StepChange warned of a “personal debt tsunami” of £6billion.

It’s thought that 1.2million people have fallen behind on bills, 820,000 on council tax and 590,000 on rent.

Households on the scheme will see their debts frozen, meaning creditors can’t add interest to it during this time.

During the break, those in debt must work with professionals to get back on track with their repayments.

Though debtors who are getting NHS treatment for mental health when applying to the scheme will continue to be protected if they do not seek debt advice from advisors.

The break can be cancelled if you don’t keep up with debt repayments where possible during the breathing space.

It’s thought the initiative could help more than 700,000 Brits get help in the first year.

This increases to 1.2million a year after a decade.

And, around 25,000 to 50,000 people in metal health crisis treatment could benefit each year.

You can apply for the breathing period every 12 months, claims Citizens Advice.

Who is eligible?

“Most debts” are covered by the scheme according to gov.uk, including:

  • Credit cards
  • Store cards
  • Personal loans
  • Pay day loans
  • Overdrafts
  • Utility bill arrears
  • Mortgage or rent arrears

Tax and benefit debts are also likely to qualify too as well as joint debts, even if one person only applies for the aid.

Guarantor loans are covered, but the guarantor will need to put in a separate application.

If you get new debts during the two month period these will not be protected by the scheme.

You also won’t be able to take out a new loan of over £500 during the 60 day period, reports Citizens Advice.

Who is not eligible?

There are a number of debt which are not covered by the scheme which include:

  • Secured debts
  • Debts incurred after your breathing space started
  • Debts from fraud
  • Court fines (but penalty charge notices like parking tickets apply)
  • Child maintenance debts or money owed under an order from family court proceedings
  • Debts from a confiscation order
  • A crisis or budgeting loan
  • Student loans
  • Advance payments of Universal Credit
  • Council tax debts that are not due yet
  • Personal injury damages

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You also can’t apply for breathing space if you have a debt relief order, individual voluntary arrangement or have filed for bankruptcy.

A debt advisor will help you find out if you are eligible.

Organisations like StepChange or the National Debtline will be able to help you.

You can call StepChange on 0800 138 1111 or fill out an online debt advice form on its website.

If you are getting help for a metal health crisis the a social worker or nurse can also apply on your behalf.

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