Individuals in debt to get breathing space to seek advice (UK)
HM Treasury is calling on debt advisors and creditors to help it develop a plan to give individuals who are overwhelmed by debt up to 6 weeks free from further interest, charges and enforcement action to encourage them to seek advice on how to manage their debt burden.
The new scheme could also include legal protections that would shield the debtor from further creditor action once a repayment plan is in place.
Problem debt affects millions of people in the UK, with causes ranging from sudden loss of employment to a more gradual dependence on debt to make ends meet.
Many people wait a year or more before seeking help and HMT argues that, by encouraging them to get expert advice sooner, the scheme will support the economy, increase productivity and help reduce bad debt write-offs.
However, it also accepts that it is ‘important to get the scheme right’ as businesses and charities will need to develop the infrastructure to manage the scheme and could potentially have additional financial pressure from not collecting debts.
Described as an ‘informal consultation’, ‘Breathing space: call for evidence’ is intended to give HMT further insight into how best to design, implement, administer and monitor a breathing space scheme by seeking informed views on
- how debtors should access, then enter, as 6 week grace period
- how a breathing space could work for creditors, as well as debtors
- how to best design a statutory debt management plan
James Salmon for The Credit Protection Association says “If debtors really are in difficulties and unable to pay their debts then any provisions that enable them to get their affairs in order and help them to ultimately meet their obligations in a structured and manageable way are for the best for both the individual and the creditor. However there need to be safe guards to ensure the system is not abused by individuals who could meet their obligations but simply wish to further delay doing so”
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