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Charity calls for ‘full review of debt options’ in the wake of Covid-19

28 October 2020

The Government should commission a full review of the debt options available to people in financial difficulty in England and Wales, according to a new briefing from the Money Advice Trust, the charity that runs National Debtline and Business Debtline.

The charity says that action is needed to provide “robust and effective debt options that work within the new context of Covid-19” – with a two phase review needed to consider both short-term and long-term changes required to the personal insolvency regime and debt options more widely. 

The call comes as the impact of the pandemic is widening eligibility gaps in existing statutory solutions, with income shocks making bankruptcy and debt relief order (DRO) fees even harder to meet and making it harder for those already in solutions to keep up with their payments.

Options that a full review could consider, summarised in the Money Advice Trust’s new briefing Debt options in the new normal, include:

·         Waiving fees for debt relief orders (DROs) and bankruptcy for those on income-related benefits, and reducing fees for other applicants

·         Making further amendments to the Individual Voluntary Arrangement (IVA) Protocol to help people in existing IVAs continue with their existing solutions

·         Reviewing debt and asset limits across statutory insolvency solutions

·         Considering the role of ‘low and grow’ Debt Management Plans (DMPs)

The (then) Money Advice Service conducted its own review of debt options in the UK, publishing its Debt Solutions in the UK report in January 2018 –with recommendations that the Money Advice Trust says should be taken into account in any government review.

The charity has welcomed the Government’s decision to stick to its Spring 2021 launch timetable for the new statutory Breathing Space scheme in England and Wales – but is seeking greater clarity on the timetable for the introduction of Statutory Debt Repayment Plans, which it says should be implemented “as an urgent priority”.

The Scottish Government has already made temporary changes to statutory debt solutions to help people impacted by Covid-19, and is planning to conduct an overarching review of debt solutions in Scotland.

Jane Tully, director of external affairs at the Money Advice Trust, the charity that runs National Debtline and Business Debtline, said:

“A full government review of debt options available to people in England and Wales is badly needed– and the impact of Covid-19 has made it even more important that we take a comprehensive, wide-angle view on what debt options are needed.  The framework we now have has evolved in a piecemeal fashion over several decades – and there is a risk that more and more people will fall through its gaps in the coming years.

“This review should look both at the short-term changes required to help people in the immediate aftermath of Covid-19, and the long-term changes needed to reset and future-proof our debt options framework.  The Money Advice Service’s previous recommendations should also be taken into account.

“In addition, as we move closer to the launch the new statutory Breathing Space scheme, greater clarity is needed on the timetable for the implementation of Statutory Debt Repayment Plans.  The Government should treat this as an urgent priority.”​

Read the Money Advice Trust's full briefing here​.

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