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Debt can be very useful, for example, it can enable people to buy assets like houses, but it can also become a problem and if it does, then that problem needs to be addressed.  Dealing with debt can be a challenge for even the most emotionally-stable of people, it can be even more difficult for those already struggling with mental health issues.

The first principle of dealing with debt – when you’re in a hole, stop digging

While this statement may sound like simple common sense, in reality, once a person gets into a problem debt situation, it can rapidly turn into a vicious spiral downwards due to creditors taking standard enforcement actions.  For example, if a borrower goes over their limit on a credit card, it is common for lenders to levy fees until they bring the amount outstanding back within the agreed limit (this is in addition to interest payments).  On the one hand, this is understandable from a certain perspective in that lenders with borrowers to stay within their contractual agreement and these fees act as a “stick” to discourage borrowers from using their credit cards inappropriately.  On the other hand, if a borrow is already in a situation where they are struggling to make ends meet and can only make the minimum payments on their debts, then even less of those payments will go towards clearing the underlying debt as opposed to servicing this.  Even if borrowers manage to avoid going over their limits, interest payments, particularly on high-interest products such as credit cards, can easily eat into their repayments, making it harder to get out of debt.  For this reason, the government has proposed a Debt Respite scheme, which has been nicknamed the “breathing space” scheme, which essentially gives those in problem debt a period of time without interest, fees, or enforcement action, to allow them to address their debt issues before they get truly out of hand.

The Debt Respite Scheme

The breathing space scheme was first mooted by the government back in October 2017 and, current indications are that the details of it will be finalized over the summer, although this is not completely guaranteed.  Based on the information available at the moment, the intention is to give debtors a 6-week period in which to get on top of their situation, although some debt campaigners are arguing that this period should be longer.  Being granted this breathing space will usually be dependent on attending a debt advice meeting, however it  has recently been confirmed that exemptions will be made for those in extenuating circumstances and that these exemptions will extend to those dealing with serious mental health issues.

Victory for mental health campaigners

According to the Money and Mental Health Policy Institute, up to 23,000 per year find themselves dealing with problem debt while hospitalised due to mental health issues.  Martin Lewis, founder of the institute, worked with mental health charities and MPs from different parties to campaign for serious mental health issues to be recognised as extenuating circumstances which would prevent people from attending debt advice meetings and arranged for the delivery of 10,000 letters to the Chancellor from people who supported the move.  As a result, an amendment was introduced to the Financial Guidance and Claims Bill, which specifically recognises that people who find themselves in hospital or being assisted by a community crisis team due to mental health issues will still qualify for the new breathing space scheme when it is finally introduced.  At this point, there has yet to be a date set for the introduction of the new scheme.

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