The Insolvency Service has made ‘progress’ on a scheme to give people in problem debt legal protection against creditor enforcement, while they seek appropriate debt relief.

Breathing space would protect individuals from debt recovery and enforcement action while they work with a debt advice agency.

The temporary protection will allow people to take control of their finances, seek full professional advice and identify and access a positive debt solution.

It is thought that the scheme would benefit debtors and creditors by helping people get advice early, rather than burying their head in the sand and getting deeper into trouble.

Last year, the government launched a consultation on the scheme with a number of policy proposals.

Part of the proposals were dedicated to the main criteria that would need to be satisfied before an individual could access breathing space. To qualify for the scheme, an individual would need to:

• Access debt advice
• Be assessed as being in problem debt by a debt adviser
• Not have been in breathing space in the previous 12 months

The second qualification is important. Before a person can access breathing space, a debt adviser would need to judge that they are in significant financial difficulty and would benefit from entering a debt solution.

These debt solutions include Bankruptcy, a Debt Relief Order, a Debt Management Plan or an Individual Voluntary Arrangement (IVA).

For individuals that qualify, most creditor enforcement action – such as contacting a debtor to request payment, taking court action and using enforcers or bailiffs to collect debt – would be paused.

In addition, any interest payments, as well as any fees and charges relating to a debtor defaulting on payments, would stop accruing.

Under the government proposals, a wide range of personal debts would be within the scope of the protections along with business debts incurred by small sole traders.

Some personal debts that would not be included under the protections include:

• Fines imposed by a court
• Child maintenance payments and other debts arising from a family court order
• Student loans
• Personal injury liabilities

Are you struggling with problem debt? Find out more about debt relief solutions by speaking to an adviser today. Call: 0800 611 8888.