The Department of Constitutional Affairs is planning to test a scheme that provides people with six months' grace from debt repayments if their financial circumstances change unexpectedly.
Under the new government plans, an 'enforcement restriction order' will provide consumers - who are unable to repay debts due to sudden illness or redundancy - with temporary relief from debt recovery. In other words, the enforcement restriction order will stop any lender from taking court action during the six-month period against a borrower.
The steps that we are taking will ensure that debtors are able to resolve their problems at the earliest possible stage and avoid, wherever possible, the cost and stress of court proceedings, Constitutional Affairs Minister David Lammy said.
We will assist debtors while improving the return to creditors as part of the Government's wider strategy for coping with indebtedness in society, he said.
The new court measures will also try and revise how debts are to be repaid in order to help both debtors and creditors perform their duties in a proper manner.
The scheme, however, is applicable to only those people with maximum debts of £15,000 and those that meet minimum disposable income levels.
The department said in England and Wales alone, around 5 million people are struggling to repay their debts and require about 40 per cent of their income to service the loan, with domestic bills making larger chunk of the payment.
While Debt Free Direct a financial management group - says 1.5 million people have fallen into debt as a result of illness, with 1.3 million hit by redundancy.
The move was appreciated by John Fairhurst managing director Payplan a debt charity who said: It was ideal in the case of losing a job or falling ill which can seriously affect your finances. He also said that the Government needed to produce more detail of who qualifies, while.
The department plans to launch a number of pilot schemes in the next two years, before commencing the operation in 2008.
Posted
on : Sat, 19 Mar 2005 00:00 GMT | Debt News
By : Rob Davis
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