On 30 October 2018, HM Treasury published a consultation (the Consultation) on the policy proposal for the implementation of a breathing space and statutory debt repayment plan, both announced in the 2017 Conservative party manifesto. The two proposals should be viewed separately.
The first proposal, breathing space, would give an individual in problem debt the right to legal protections from creditor action whilst they receive debt advice and enter an appropriate debt solution.
The second proposal, the statutory debt repayment plan, would enable an individual in problem debt to enter a statutory agreement to repay their debts to a manageable timetable. Individuals entering a plan would receive legal protections from creditor action for the duration of their plan.
To be eligible for the breathing space, it is proposed that an individual would have to:
- access debt advice – to ensure that debtors are able to make informed decisions about the options available to them to deal with their debts;
- be assessed as being in problem debt by a debt adviser – a debt adviser should retrieve information during a financial assessment indicating that breathing space would be of best help to a debtor, and be able to identify the debtors creditors; and
- not have been in breathing space in the previous 12 months – reducing abuse of the scheme.
Similarly, to be eligible for the statutory debt repayment plan, an individual:
- must access debt advice – this must be via an FCA regulated organisation or have appropriate exemptions from FCA regulation to offer debt advice;
- must be assessed as able to repay their debts in full over a reasonable timeframe – an individual would only be eligible for a plan if they had a realistic chance of repaying all of their debts over a period of no more than ten years; and
- their creditors must have agreed to the terms of the plan, or the Insolvency Service must rule that the plan proposed by their debt adviser was fair and reasonable, so that creditors are obliged to comply with it.
The deadline for responses to the Consultation is 29 January 2019.