The government has pledged that consumers struggling with problem debt will now be given extra help and time to get their finances under control.
Economic secretary to the Treasury, John Glen, announced yesterday (June 19) that a new Breathing Space scheme, which gives those in financial trouble a 60-day period to work out a repayment plan, will be introduced from 2021.
During this time, people with problem debt will be protected from creditor enforcement and their interest will be frozen while they engage with advisers to find a long-term solution to their debts.
Those in mental health related treatment will not have to seek debt advice during the 60-day period and will continue to receive protection from credit enforcement and frozen interest for the entirety of their treatment.
The scheme will cover a wide range of debts and will also include late payments on local and central government loans, such as council tax arrears, personal tax debts and benefit overpayments.
A statutory debt repayment plan will be included in the Breathing Space package. The plan, which adjusts over time as life circumstances change, is aimed to help individuals repay their debts over a manageable timeframe.
The Breathing Space package was first announced in April last year when the government approved amendments to the Financial Guidance and Claims Bill that meant those in a mental health crisis wouldn't have to attend a debt advice meeting.
Mr Glen said: "Problem debt can have a devastating impact of people’s lives, putting a huge burden on individuals which can lead to family breakdown, stress and mental health issues.
"No one should be stuck in an endless cycle of debt and facing the ever-looming threat of invasive debt collectors."
Kathryn Knowles, managing director at Cura Financial Services, said: "It can be quite easy to slip into debt without realising it and you are then suddenly hit with a whammy of what feels like insurmountable loans.
"Whether you are single or have a family, getting out of debt is not easy and having access to an expert that can teach you tried and tested techniques is invaluable."
Ms Knowles said simply sharing a problem could help with stress levels and the scheme would have huge mental health and wellbeing benefits.
Helen Undy, chief executive of the Money and Mental Health Policy Institute, said the scheme could genuinely save lives.
She said: "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.
"We are delighted that the government acted on our call to protect people from being hassled about debts while they’re receiving crisis care, and we look forward to working with ministers to put these plans in place over the coming year."
Chief executive of debt charity StepChange, Phil Andrew, said people looking for a sustainable way to repay their debts had traditionally received little protection which left them vulnerable to inconsistent creditor approaches.