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Insolvency profession welcomes government breathing space plans

Commenting on the government’s launch of a call for evidence on plans to introduce a ‘breathing space’ for indebted individuals, Adrian Hyde, president of insolvency trade body R3, says:

“Government action to implement the long-promised breathing space for people in debt is welcome. The insolvency profession has called for this type of procedure for several years.

“A breathing space is an opportunity for people to access the impartial, unpressured advice they need about their finances and the options they have for resolving their debts at a crucial time. Too often, people can’t access the right advice or can be pressured to take action before receiving advice, and they can end up in a debt solution inappropriate for their needs. This only makes their debt problems worse.

“Introducing a breathing space would benefit everyone involved: both the indebted individual and their creditors. If people find it easier to access a debt solution that suits their situation, they can repay more money to creditors and get back on their feet much quicker, no longer burdened by debt.

“However, any breathing space must find a balance between the person in debt and their creditors. In most cases, individuals will have had plenty of opportunities to address specific debts or speak to creditors before a breathing space becomes necessary. Breathing space should be seen a last chance to seek help and understand what the options are. We’re pleased the government is looking at a six week breathing space rather than some of the longer periods which have been suggested.

“A longer breathing space would be a concern to lenders worried about the length of time it might take to recoup outstanding debts. This risks lenders becoming less likely to lend in the first place, or raising the cost of borrowing. They may also take action against borrowers at a much earlier stage. A shorter breathing space would encourage those in debt to take action and would be a means of finding a path out of debt rather than acting as an unsatisfactory debt solution in and of itself.”

Under R3’s own proposals for breathing space, put forward in 2015:

  • An indebted individual would be given 28 days in which debt repayments, interest and other charges are frozen and further creditor action prevented;
  • During the 28-day period an individual would be required to speak to a qualified adviser to seek advice on creating a plan to deal with their debts;
  • Every financially distressed individual would be informed of the availability of the breathing space before being advised to enter a debt relief solution or before a bankruptcy order could be made against them;
  • Individuals would only be allowed to use breathing space once per year;
  • The breathing space period could be extended if necessary.

Adrian adds: “We’re pleased that having been included in both Conservative and Labour manifestos ahead of the election – and despite its absence from the Queen’s Speech – progress is being made on breathing space.”

R3’s Breathing Space proposals can be read here.

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.