Photo of Cathryn Williams

In the following article published by Lexis Nexis/LNB News on 19 June, Cathryn Williams, restructuring partner at the London office of Crowell & Moring, comments on the introduction of “breathing space” for those individuals facing debts issues in the UK.

HM Treasury has announced a new breathing space scheme which will give individuals struggling with problem debt an extra 60 days to get their finances under control. During that time, people with problem debts will be protected from enforcement action from creditors and their interest will remain frozen, but they will be required to consult with professional debt advisers to get back on track with payments. Individuals receiving NHS treatment for mental health will be exempted from the requirement to seek debt advice. The scheme will cover various forms of debts, including arrears owed to the government such as council tax, personal tax and benefit overpayments.

Cathryn Williams, partner at Crowell & Moring, comments on the scheme, highlighting that it will allow those with debt problems to ‘prevent such issues spiralling out of control’.

The announcement follows a consultation which ran until 29 January 2019. The scheme will now be put for a parliamentary vote by the end of 2019 and will be implemented in early 2021.

‘Debt is a significant issue in our society’

Williams, from Crowell & Moring, explains that ‘in the last quarter of 2018, individual insolvency came in at an eight year high with over 115,000 people becoming insolvent in the course of 2018.’ She adds: ‘Individual debt therefore continues to be a significant issue in our society and breathing space will enable individuals affected by debt problems to prevent such issues spiralling out of control, providing them with the time to get the help and advice they need from qualified and experienced professionals to manage their debts.’

City minister, John Glen, explained that ‘no one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors.’

Phil Andrew, CEO of StepChange Debt Charity, points to the inclusion of debt owed to the government: ‘Breathing space and statutory debt repayment plans will fundamentally improve how people seeking to repay debt are treated, putting them in a far less precarious position. We are particularly pleased to see the government’s confirmation that debts owed to government itself will be included in the scheme.’

Joanna Elson OBE, chief executive of the Money Advice Trust, focuses on the overall benefits of the scheme: ‘Breathing space will provide a powerful incentive for people to seek debt advice, safe in the knowledge they will be given the time and statutory protections they need to begin to resolve their financial difficulty.’

Debt and mental health

Helen Undy, chief executive of the Money and Mental Health Policy Institute, pointed to the relationship between debt problems and mental health: ‘This scheme could genuinely save lives. Everyone experiencing a mental health crisis should have the opportunity to recover free from escalating debt fees, charges and the threat of bailiffs arriving at their door.’

Williams also agrees that there is a relationship between debt problems and mental health: ‘The recognition that mental health issues can often cause or exacerbate individual debt problems and the introduction of protection for those individuals affected by mental health issues is a welcome development.’