A new ‘respite’ program has been launched in England and Wales to protect people in difficulty from interest and additional charges.
People receiving debt counseling can request the break, which lasts up to 60 days, to prevent them from spiraling into debt.
The Treasury has estimated that up to 700,000 people could be helped by the program in its first year.
People who receive treatment for mental health problems can get more help.
The separate system for those receiving mental health crisis treatment lasts for the duration of that treatment, plus an additional 30 days.
Debt charities have campaigned for years for the full introduction of a respite system, after seeing people borrow more money to pay interest and charges on existing debt.
Under this program, these additional costs will be suspended and no enforcement action can be taken if a debt counselor agrees that a period of respite is appropriate.
It can only be used once in a 12 month period, and the government has emphasized that this is not a payment holiday. Regular bills such as mortgage, rent, utility bills, and taxes still need to be paid.
‘Fight fire with fire’
Lee lives in the south-east of England and ended up owing almost £ 20,000 after losing his job and the end of his marriage.
“It was really overhead living expenses, I wasn’t lavish and partying or going on expensive vacations,” he said.
“It was my fault and bad credit card management.”
Lee said the situation was “frightening”.
“Looking back, hindsight being the wonderful thing it is, I should have done something sooner, but I didn’t, and thought I could do it.
“He is trying to extinguish fire with fire,” he added. “You use a credit card to try to pay for everything. It’s really crazy, really.”
Lorraine Charlton, Debt Expert at Citizens Advice, said: “If you have unmanageable debt, the new regime may give you time to get the advice that will help you and start taking action.
“Breathing in space is not a temporary fix for just keeping your creditors at bay. You will have to work with your debt counselor to try and make a plan to deal with your debts.”
A similar system is already operating in Scotland.
Joanna Elson, head of the Money Advice Trust, which runs the National Debtline, added that the launch marked “a major step in improving the help available to those struggling with debt.”
John Glen, Economic Secretary to the Treasury, said: “This program will give people a break from accusations, distressing letters and bailiffs visits, so that they can tackle their debt problem with the support of ‘a professional debt counselor. “
There is more support under the Mental Health Breathing Space System. It is more open and someone can use it more than once a year.
Under this program, a licensed mental health professional can certify that a person is receiving treatment, and then a debt counselor can determine if they are eligible for the program.