Fulfilling a commitment made via the 2017 manifesto, the Government will be introducing a 60-day Breathing Space period from 2021 for people with problem debt.
This has been welcomed by the Insolvency and Business Recovery sector, who have long lobbied the government to offer an extended time span for organisations who find themselves in financial trouble to seek advice and put plans into action.
Duncan Swift, President of R3, the recovery industry’s professional body stated, “We welcome the Government’s announcement that it is moving ahead with the Breathing Space policy. We’ve long-supported the idea of a breathing space, and plans for its introduction will help those struggling with debts to get the advice they need to begin to resolve them.
“We also welcome the commitment that individuals using the Breathing Space must engage with professional debt advisers. Professional advice is a must for individuals struggling with debt. It gives them the chance to talk to an experienced, independent third party who can help them look at their debt issues objectively and find the fairest, most practical way of resolving them.
“The news that arrears owed to central and local government will be included in the Breathing Space is also positive and will mean the person who is in debt will be more fully protected from creditor pressure and from the risks of making a quick decision rather than a considered one.”
However, until the full consultation paper is released it is not fully clear how the policy will work.
One area in question is whether the “30-day check-in”, mentioned during the consultation will be included in the final publication of the bill.
The check-in is an essential way of ensuring individuals in the breathing space arrangement take proactive action to tackle their financial difficulties and helps to mitigate the tension between the needs of debtors and the rights of creditors.
In addition, what criteria will be used in assessing how to utilise the mental health support proposals? Equally, how will the Statutory Debt Repayment Plan work? Will it sit easily within the existing insolvency framework or outside of it etc?
At Griffin James, we welcome the foresight of the government to go some way to allay the suffering and turmoil that organisations facing financial difficulties can get into, but before the final draft is put before parliament for approval, we suggest the government take a fuller look at details to ensure all eventualities are met.