Debt impacts millions of us in the UK – and for many families and individuals, the pandemic will have only made things worse. 

Factors that can push people into debt include major life changes (of which there have been many this past year), becoming – and staying – unwell, not getting paid, living on a low income or needing to buy new things.

If you’re kept awake at night by thoughts of your bank balance, or struggling to fend off panic attacks every time your bills go out, know that you’re not alone. Around eight million people in the UK are thought to be living in problem debt.

A government scheme, called Breathing Space, hopes to help thousands of people struggling with such debt. Those who are eligible will be offered financial advice and given respite from debt enforcement action over a 60-day period. 

As part of the scheme, which has the potential to help 700,000 people in England and Wales, people will receive free debt advice to help them begin the long, but ultimately rewarding, journey out of the red. 

Past research by the Money Advice Service found 65% of people who received regulated debt advice were repaying their debts or had repaid them in full within three to six months.

Being given breathing space from debt collectors is crucial to getting back on track, as research by debt charity StepChange found six in 10 people who weren’t protected from interest, charges and new enforcement action went on to take out even more credit to cope.

What exactly is Breathing Space?

Breathing Space is a free government scheme that aims to relieve some of the pressure of dealing with your creditors, so you can focus on getting professional advice and getting out of debt.

The hope is you’ll be able to get set up with a debt solution without worrying about being chased for payment or incurring extra charges. The scheme isn’t a payment holiday, so you’ll still have to continue paying your debts during this time (if you can afford to do so), but it does prevent action from being taken against you if you’re unable to pay.

John Glen, economic secretary to the Treasury, said of the launch: “This scheme will give people a breathing space from charges, distressing letters and bailiff visits, so they can tackle their problem debt with support from a professional debt adviser.” 

Who is eligible?

You must live in England or Wales and you must owe at least one qualifying debt to a creditor. Most debts can be included in a Breathing Space arrangement.

There are some factors that might make you ineligible for the scheme, however.  For example, you can only access Breathing Space once in a 12-month period, and you are ineligible if you’re already on a Debt Relief Order (DRO) or an Individual Voluntary Arrangement (IVA). You also must not be an undischarged bankrupt, or subject to an interim order.

The best way to find out if you’re eligible for the free scheme is to ring up a debt advice service, which will be able to submit an application on your behalf.

Even if you are ineligible, there may be other ways to get help so it’s always worth reaching out for professional advice. You can access free advice through Citizens Advice, the charity Step Change, the Money Advice Service and National Debtline.

I’m eligible – now what?

You’ll be taken through the application process with a debt advisor. Once registered, the Insolvency Service will contact your creditors who won’t be able to add interest or fees to your debts, or take enforcement action, for 60 days.

People using the scheme are urged to: keep up regular payments (for example: rent, mortgage, council tax, insurance payments and utility bills); continue seeking debt advice; and avoid taking out any more credit during the 60 days.

During your time on the scheme, you’ll be in touch with a debt advisor who can help you get on top of your debt. They’ll give you advice relevant to your situation and will get you set up with a suitable ‘debt solution’.

This could be a debt management plan (DMP), which helps you to manage your debts, paying them off at a more affordable rate; a debt relief order (DRO) which sees debts written off if you have a relatively low level of debt and few assets; or an individual voluntary arrangement (IVA). The latter is a formal agreement allowing you to make affordable payments to your debts, usually over five or six years. At the end of the agreement, any unsecured debt left is written off.

There are lots of other debt solutions available, which you can find out more about here.

Other options for managing debt

• Create a monthly budget and stick to it. Figure out what money comes into your account each month and what goes out – are there any direct debits or standing orders you can cancel to give yourself a break? 

• If you have lots of credit card debt, think about switching to a 0% balance transfer card so you can have a break from all of the interest that’s been accruing. 

• Speak to lenders or landlords about the possibility of a mortgage or rent payment holiday.

• Find out how you can reduce your monthly bills – often simply changing bill provider for a more competitive rate can save you money in the long-term. If you tell your existing provider you’re shopping around, they might offer you a better deal to encourage you to stay.

• Avoid rent-to-buy schemes on items like household appliances if you can because you could end up paying four times what an item is worth. If you can’t afford to buy an item up front, it’s worth finding out whether other forms of credit might be cheaper in the long run.