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New consultation on breathing space proposals

  • United Kingdom
  • Financial services disputes and investigations


On 29 October 2018 following the Budget speech, the Treasury published a consultation on its policy proposal for Breathing Space and Statutory Debt Repayment Plans. The policy aims to compliment the Government’s new Single Financial Guidance Body, enabling people in problem debt to take back control of their finances and put them on long term sustainable footing. 

The consultation follows the Treasury’s Call for Evidence consultation which ran from 14 October 2017 to 16 January 2018.

The consultation is part of the Government’s approach to tackling problem debt and will run from 29 October 2018 to 29 January 2019. This note sets out a summary of the consultation paper. 

What are breathing space and statutory repayment plans?

  • Breathing space endeavours to give an individual in problem debt the right to legal protection from creditor action for a period of 60 days, within which time they will be able to receive debt advice in relation to a suitable debt solution. 
  • Individuals in problem debt will be able to enter into a statutory repayment plan with their creditors, providing for their debts to be repaid in full over a manageable timetable.  Individuals entering a plan would receive protection from enforcement action from creditors for the duration of their plan and relief from interest and charges.

Key issues for consultation

The consultation has three sections as follows:

  • Eligibility criteria for entering breathing space and the plan;
  • The protections of breathing space and the plan; and
  • Detail about the administration of both policy proposals

Breathing Space 


The Government proposes that there would be three main criteria that an individual would have to fulfil to enter breathing space:

  • Access debt advice – an individual would have to obtain FCA regulated debt advice, or advice from another organisation that qualifies for an exemption from FCA authorisation, such as a local authority
  • Assessed as being in problem debt – a debt advisor would have to judge that an individual is in significant financial difficulty and could benefit from entering a debt solution
  • One breathing space a year – an individual would not be able to enter breathing space if they had made a successful application to enter breathing space in the previous 12 months

Alternative access due to mental health issues

  • The consultation seeks input on proposals for an alternative access mechanism for breathing space for individuals suffering mental illness. The Government recognises that this is a complex area and more detail of the proposal will be developed following consultation with expert stakeholders
  • The Government proposes that an individual who is suffering with a mental health condition would not need to satisfy the above criteria, instead their admittance into the scheme would be based on an assessment by a mental health professional
  • It is intended that the assessment would be provided to a debt advice agency who would then apply for breathing space on the debtor’s behalf


  • Breathing space will last for 60 days and during this time any interest payments and fees and charges are prevented from accruing
  • Creditors would not be able to retrospectively charge such interest, fees and charges once a debtor left the breathing space scheme.  Creditors would also be prevented from taking any enforcement, collection or recovery action and any ongoing enforcement action would be paused
  • It is intended that the protections will cover a wide range of personal debts.  Business debts incurred by small sole traders who do not meet the VAT registration threshold (currently £85,000) are also included
  • The Government has detailed that a number of debts will be excluded, including fines imposed by a court, child maintenance payments and student loans  However, mortgage and rent arrears are included.


  • The Government proposes that a public agency will provide administrative support for breathing space to avoid over-burdensome administrative processes for both creditors and debt advisors
  • The Government has agreed with responses to the Call for Evidence that the Insolvency Service should undertake this role

Statutory Debt Repayment Plans

The Government recognises that the implementation of an effective, well-designed plan would serve a number of debtors not currently suited to existing statutory debt solutions. In order for a plan to be effective, the Government believes that it should:

  • Provide wide-ranging protections for debtors, including those that do not currently choose to enter informal Debt Management Plans;
  • Be easy to offer and administer for debt advisers; and
  • Improve returns for creditors

Given that there are substantial challenges involved in designing and introducing plans, the government intends that the plan will be developed over a longer time period than the introduction of breathing space. The Government will provide further information on this in early 2019.


The Government proposes that an individual would have to meet three criteria to be eligible for a plan:

1. Access Debt Advice -  they must access debt advice;

2. Ability to repay - they must be assessed to be able to repay their debts in full over a reasonable timeframe (the consultation indicates not more than 10 years);

3. Creditor agreement - 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 is fair and reasonable in which case it will be imposed on creditors

As with breathing space, the Government does not propose to set specific limits on the debt or income levels than an individual must have in order to be able to enter a plan.

Before the plan starts, creditors would have 14 days from receiving the proposal to object to the adviser on the basis of a limited number of available criteria.  If less than 25% by value of the creditors objected to the plan then the plan will simply commence. If more than 25% by value of the creditors objected to the plan then the plan will be subject to a “fair and reasonable” assessment by the Insolvency Service. If an individual’s proposed plan was deemed to be “fair and reasonable” it would commence immediately.


  • The Government intends to include almost all debts in the protections however it recognises that some debts should be excluded such as fines imposed by a court, student loans and child maintenance payments.
  • Mortgage or rent arrears would be excludable from the plan on the request of a debtor or debt adviser
  • The plan would prevent the further accrual of all interest and default fees and charges on the debts included in the plan
  • All collections and recovery action on debts included in the plan would cease once a plan is in place
  • The repayment of some debts would be prioritised within the plan, including housing debts, tax and benefit debts and utility debts
  • An individual would have annual reviews of their plan and be able to request a payment break from their plan of up to six months if they have a severe but temporary financial shock (i.e. job loss, sickness)
  • If a debtor in a plan did not comply with the eligibility requirements for more than one month, they would be given one month’s notice by their debt adviser to comply with the scheme’s rules
  • It appears that the cost of funding the plan would be deducted from the monthly payment.  The percentage deduction has not yet been set.  Although not spelled out it is likely that the creditor would need to credit the full monthly payment against the debt as if no deduction for funding had been made


As administration of the plan is likely to be more burdensome than the administration of breathing space, the government is inviting views on how it should be administered and funded  The Insolvency Service will also be responsible for analysing the suitability of Statutory Agreements.

Credit referencing

The government will works with CRAs over the coming months to find an appropriate and workable solution to how breathing space and the plan may be reported on someone’s credit file.

What’s next?

The current consultation requests that stakeholders provide their thoughts on the proposed schemes by way of answering 30 questions covering the scope, implementation and enforcement of the schemes.  The period for stakeholders to do so expires on 29 January 2019.  The Government will then analyse responses and respond in due course, setting out the next steps on the scheme’s implementation in that response, including the regulations that will be introduced to establish the scheme.