Breathing Spaces data: the squeezed middle come up for air

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on publication of the government’s Breathing Spaces data, which shows the squeezed middle come up for air.

Key points from analysis:
  • Breathing spaces are available to anyone with problem debt. They provide legal protection from people you owe money to for 60 days.
  • In the first year, there were 63,864 breathing spaces registered. That’s one for every 736 adults, and a rate of 13.6 people per 10,000.
  • Breathing spaces rates were highest for people aged 25-44 (one in445 of those aged 25-34 and one in 440 of those aged 35-44), and lowest for those aged 65 and over.
  • Three quarters of those who entered the arrangements were aged 25-54 – despite the fact they only make up half the adult population.
  • The North East had the highest breathing spaces rate atone in 559  London had the lowest rate, at one in 1,025 adults.
  • The age distribution was similar to insolvency rates, although insolvency rates are higher.
  • Mental health breathing spaces make up less than 2% of the total number of breathing spaces.
What are Breathing Spaces?

Breathing spaces are available to anyone with problem debt. They provide legal protection from people you owe money to for 60 days, pausing any debt collection and freezing most interest and charges. You won’t have to pay any arrears during this time, but you have to continue with ongoing payments (like the mortgage) where you can.

Specific mental health crisis breathing spaces apply to people receiving treatment for a mental health crisis and last as long as the treatment – plus 30 days.

Both types of breathing space are put in place by someone authorised by the FCA to provide debt counselling (or the local authority). They will administer the service and work with the Insolvency Service to ensure everyone who you owe money to is kept informed.

Some debts can’t be included, ranging from court fines, to child maintenance, student loans, advance payments of Universal Credit and some secured loans.

You can’t use breathing spaces if you have a debt relief order or individual voluntary arrangement in place, or if you have an undischarged bankruptcy. You can’t have one already in place, or have had a standard one in the past 12 months.

Mental health crisis breathing spaces are put in place through a debt adviser, but the person owing the money does not have to arrange it. It can be done by a representative, social worker, doctor, nurse or carer. There’s no set minimum amount of time you have to leave between these arrangements.

Sarah Coles says:

“The squeezed middle are facing horrible pressure from all sides. It means they’ve been more likely to seize hold of breathing spaces over the past year, and take the opportunity to come up for air.

“The legislation gives people a 60-day break from their arrears and from anyone chasing them, while they get their finances in order. They’re put in place by debt counsellors, so will often be used to put the pressure on pause, so they have the space to make a decision about the best possible way to deal with problem debts.

“People aged 35-44 are most likely to have used them. At this stage in life, there’s a reasonable chance you have a family stretching your finances to breaking point, including the risk of huge childcare bills or a lower income as one parent stops working full time for a period. At the same time, you may have the pressure of a large mortgage or other debts pushing your monthly expenses even higher. When you add in rising prices that are making it even harder for all of us to make ends meet, it’s hardly surprising that so many people need help.

“Those aged 25-44 are more than twice as likely to use breathing spaces as those aged 18-24, and nine times more likely than those aged 65 and over.

“Breathing spaces are put in place by debt counsellors, so if you’re struggling to manage your borrowing, a debt charity should be your first port of call. StepChange puts around two thirds of these arrangements in place, while Citizens Advice is responsible for around one in seven, so these are reasonable places to start. They can help you understand your position, and your options, so you can find a way through. Struggling with borrowing is always incredibly stressful, but you don’t have to do it alone.”

 

Kindly shared by Hargreaves Lansdown

Main article photo courtesy of Pixabay