A report recently released by the Insolvency trade body R3 recommends debtors struggling with repayments should be allowed a 28 day break to give them some ‘breathing space’ from creditor action and enforcement. The purpose is to allow them to find the appropriate debt advice which could help them with their problems.

The proposal is certainly worth serious consideration. With the pressure of debts piling up, this can often be the time when individuals take rushed and inappropriate debt solutions. These ‘solutions’, such as taking out further debt or ‘payday loans’ to enable them to pay off existing debts, may not the best option, leaving them saddled with further creditors to try and pay. Often what is required is a debt solution such as an Individual Voluntary Arrangement (IVA) or even Bankruptcy.

The 28 day ‘breathing space’ idea should allow debtors the opportunity to consult and seek the appropriate professional debt advice which would hopefully resolve their insolvency.

This is not the first time that a ‘breathing space’ proposal has been suggested. Step Change, the debt charity, has been campaigning for some time to see debtors given a 12 month period to allow them to get their finances in order.

I certainly think the concept is worth looking at and would be a step in the right direction in helping people with their debts. During the ‘breathing space’ the debtor would be required to seek the appropriate debt advice and explore appropriate solutions to their problems. The flip side of this would be that creditors would agree not to take action during this time, repayments would not be expected and interest and charges would be frozen.

The practicalities of the proposal brought by R3 include:

  • Creditors informing indebted individuals of the availability of the 28 day ‘breathing space’ period before advising them to enter into a debt solution or before a Bankruptcy Order could be made against them.
  • If the debtor takes advantage of the ‘breathing space’ it would be recorded on a central register with creditors being informed.
  • There will be a maximum ‘breathing space’ of one per year for each debtor.
  • There would be provision for a creditor to challenge the use of a ‘breathing space’ by a debtor if they believed it was being used simply as a delaying tactic simply to avoid debt repayment.

R3 acknowledge that most people need time, crucially without pressure from creditors, to seek the appropriate debt advice to enable them to become debt free or at least restructure their debts in a more manageable way, perhaps through a vehicle such as an IVA.

There needs to be more of a balance between the indebted individual who should be given a chance to address their financial problems as quickly as possible and creditors who should receive the best repayment outcome in the circumstances.

The ‘breathing space’ concept is designed to get people the right debt advice and find the right debt solution. It should not be used as a tool for avoiding repaying debts. It certainly should be used as a last resort for debtors who have already received numerous notices of debt collection and enforcement and provide them with a last opportunity to tackle their financial problems.

I personally think the idea of a ‘Breathing Space’ should be implemented in one form or another as it would focus the debtors mind to dealing with their problems in a stress free environment. This would hopefully allow them to find the best outcome possible for their debt problems.