HM Treasury has confirmed that the new 'breathing space' scheme to help those with problem debts will become operational next year. The scheme will provide legal protections from creditor action while those affected will receive professional debt advice in order to find an appropriate solution to their debt issues.

The breathing space scheme will have a 60-day respite period during which individuals will be protected from almost all enforcement action by creditors whilst working with a debt advice agency. The scheme will apply to almost all personal debts such as credit cards and loans as well a wide range of debts owed to the Government. The use of the scheme will help prevent debts from continuing to spiral by stopping the accrual of contractual interest, default interest, fees and charges during the breathing space period.

The same measures will apply to certain vulnerable individuals working with Approved Mental Health Professionals. Creditors will also benefit from the introduction of the scheme with over £400 million in extra repayments expected in the first year, as individuals get the support they need to get their payments back on track. The Government has estimated that up to 700,000 people across the UK will use the scheme during its first year in operation.