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'Breathing Space' from creditor enforcement

The scale and nature of personal insolvency in England and Wales has changed considerably in recent years. In the decade to 2010 the number of insolvencies in England and Wales trebled, but the numbers have been declining steadily since.

However, the official statistics don’t tell the whole story. While the number of insolvencies may be falling, personal debt is rising. There are potentially hundreds of thousands of people with financial difficulties in non-statutory debt management plans (the latest R3/ComRes Personal Debt Snapshot estimated that as many as 1.75m people could be in some sort of plan).  While some individuals may not be eligible to enter a formal insolvency process, there is a danger that many are heading down the ‘informal’ path because they aren’t aware of all the options open to them. Likewise, there are those in a formal solution for whom a non-statutory debt management plan would be more appropriate.
For any number of reasons – from embarrassment, for example, to refusing to admit there’s a problem – people can be reluctant to seek advice on their personal finances, leading to escalating difficulties. Even once an individual has taken steps towards seeking advice, he or she can then be hurried into the wrong action by pressure from creditors or because they are uninformed of the routes available to them.  A suitable debt solution will help those with growing debts and mounting creditor notices to find a lasting and effective solution to their problem.
Later this year, Treasury will be launching a review on the legal framework of debt administration and consider providing a ‘breathing space’ or moratorium for people in debt. In anticipation of the review, R3 has launched its own proposals of what we think that should look like.  
In order to allow individuals who have been struggling with debts a final opportunity to get the necessary professional advice, R3 is proposing a 28 day ‘Breathing Space’ period.  No creditor action would be possible in this time, giving people the space to make the most appropriate decision for their circumstances in an environment free from creditor pressure. Freezing repayment, interest and charges during the 28 days would provide indebted individuals with a period of respite to tackle their financial difficulties without debts mounting further.
It’s important that we have a scheme which balances the interests of indebted individuals, who are keen to get their finances back on track, and creditors who should receive the best repayment outcome possible in the circumstances. However, R3’s breathing space proposals are not intended to be used as a tool for avoiding debt repayment. Thus, during the 28 day Breathing Space period, individuals would be required to seek professional advice and make a plan for dealing with their debts, which could range from a formal debt solution to an ‘informal’ repayment arrangement with creditors. Only one application for breathing space would be available per year for each individual.
Provisions of a similar nature exist in Scotland, Australia and Canada. While our regime is well regarded and ranked internationally, there is always room for improvement and opportunities to learn from the debt regimes of our counterparts. 

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.