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‘Breathing Space’ from creditor enforcement needed as last chance for debt advice, says insolvency profession

Financially distressed individuals should be given a 28-day break from creditor action – ‘Breathing Space’ – as a final opportunity to receive professional advice on how to deal with their debts, according to a new report launched by insolvency trade body R3 in anticipation of a forthcoming government review.

The insolvency profession is concerned that indebted individuals are in danger of ending up in an inappropriate debt solution as a result of a hasty or panicked decision or, worse yet, ignoring the problem by avoiding dealing with their debts altogether – often taking out further credit to deal with existing debts.
During the Breathing Space, the individual would be required to seek debt advice to create a plan for dealing with their debts. In return, no creditor action would be possible, and repayments, interest and charges would be frozen.
Phillip Sykes, President of R3, says: “Alleviating problem debt is a major policy challenge. Although there are effective insolvency options for dealing with debts, the difficulty is making sure people can access a debt solution appropriate for their needs.”
“People need time, without pressure from creditors, to seek professional advice on what the most appropriate course of action is. If someone can make a considered decision, that increases the chances of a better deal for the debtor and, often, a better deal for creditors.
Under the proposals in the report:
  • It would be compulsory for every financially distressed individual to be informed of the availability of the Breathing Space before being advised to enter a debt relief solution or a bankruptcy order can be made against them;
  • If the individual chooses to enter into the Breathing Space, this would be recorded on a central register and their creditors would be notified;
  • Individuals would only be allowed to use Breathing Space once per year;
  • It would be mandatory for individuals using Breathing Space to speak to a qualified adviser during the 28 days, or the protections offered by Breathing Space would cease to apply;
  • Creditors would be able to challenge Breathing Space if it is only being used as a delay tactic to avoid paying debts.
Phillip Sykes continues: “There needs to be a balance between the indebted individual, who should be allowed to rehabilitate themselves financially as quickly as possible, and creditors, who should receive the best repayment outcome possible in the circumstances.
“The Breathing Space is intended to facilitate getting the right advice and entering a suitable debt solution; it is not a tool for avoiding repaying debts. It should be seen as a last resort for those who have already received numerous notices of debt collection and enforcement, providing a final opportunity to tackle financial difficulties.”
Mandatory debt advice and ‘Breathing Space’ provisions already exist in various forms in other jurisdictions, including Scotland, Australia and Canada.
Phillip Sykes adds: “While the UK has one of the best insolvency regimes according to the World Bank, there is always room for improvement. Personal debt in England and Wales has changed dramatically in its scale and nature, with insolvency numbers trebling in the past decade, so it is necessary for the insolvency regime to change with it.”
  • Following an independent review of the Money Advice Service last year, the government agreed in March 2015 to review the legal framework for debt administration to consider the proposal of a period of ‘breathing space’ for individuals who are seeking specified debt repayment solutions by freezing interest, charges and enforcement action by creditors. The review is expected to take place by the end of the year. 

Notes to editors:

  • R3 is the trade body for Insolvency Professionals and represents the UK’s Insolvency Practitioners.

  • R3 comments on a wide variety of personal and corporate insolvency issues. Contact the press office, or see for further information.

  • R3 promotes best practice for professionals working with financially troubled individuals and businesses; all R3 members are regulated by recognised professional bodies
  • R3 stands for 'Rescue, Recovery, and Renewal' and is also known as the Association of Business Recovery Professionals.