News Article

Consumer Credit

New 28 day breathing space for debtors welcome, says

By CreditMan Monday, August 24, 2015

Leading Insolvency Provider, says recent proposals by R3 to give struggling individuals breathing space could prevent people from falling into Bankruptcy.

According to a news release from R3, an insolvency trade body, individuals who struggle with repaying their debts could benefit with a 28-day break, which it calls "Breathing Space" prior to creditors taking action. The purpose of the time is to allow the debtor adequate time to seek advice from financial experts.

According to R3, such individuals are already under pressure from creditors and likely to be under serious stress. In the process of finding solutions to an immediate problem, they sign up for guarantor loans or other inappropriate funding solutions for their debt, or agreeing to other types of debt solutions that they could have avoided with more time to consult with credit professionals, friends or family.

R3 is not the first company to recommend the Guaranteed Breathing Space solution. Step Change, a debt charity, has suggested for some time that debtors could benefit from a full year break. However, suggests that the 28-day break is more sensible than a full year, and a solution that creditors are more likely to accept. A spokesperson commented by saying; "This type of scheme has been used in the north with the Trust Deed Scotland debt solution, also Canada and Australia in the past has worked. It would help prevent people from going down the bankruptcy route."

With R3's proposal, the individual seeking the 28-days is required to explore the options available to him and to seek debt advice of others on these options. In return, his creditors agree to forego any action during the time. They would freeze any charges or interest for the 28 days and agree to avoid any action..

Other provisions of the proposal include:

  • Requiring creditors to inform the individual that the option is available before giving any advice to enter a debt solution or before entering a bankruptcy order against them.

  • When an individual choose to take part in the program, the decision is entered on a central registry and his creditors receive a notice.

  • Individuals who use the program must wait at least a year before using it again.

  • Creditors retain the right to challenge individuals filing for the program it there is reason to believe the borrower is using it as a delay tactic in order to avoid repayment of his debts.

R3's president, Phillip Sykes reports that alleviating such debts is a major challenge to current policy. While consumers have several effective insolvency options, making sure they can access the program that is appropriate for their particular debt.

He indicates borrowers need some un-pressured time for seeking advice from professionals regarding their most appropriate options for action. The time to consider the option increases the chances that both debtor and creditor receive a better deal in the end.

The program helps to provide a balance between the individual and lender, allowing consumers with debt problems to rehabilitate themselves quickly and allows the company to receive the best possible outcome for repayment, considering the circumstances.

With this program, debtors get the right debt advice and enter into a solution that is suitable to their needs without avoiding debt repayment. It is a program of last resort for debtors who have already received notices concerning debt collection and enforcement actions, in order to provide a final opportunity to overcome financial difficulties.

While the World Band considers the United Kingdom to have one of the top insolvency regimes, it has room for improvement. In the last decade, the number of insolvencies has trebled due to personal debt in England and Wales, making it necessary to make changes in this regime in order to meet the needs of the new millennium.