Consultation on Statutory Debt Repayment Plan

This consultation on the Statutory Debt Repayment Plan (SDRP) sets out the policy development that has taken place since earlier Government consultations in 2019. It seeks stakeholder views on three broad areas:

• The draft regulations that are necessary to implement the SDRP.
• Questions on outstanding policy issues and operational considerations.
• A consultation stage draft impact assessment.

The consultation is the latest step in a 2017 Conservative Party manifesto commitment to introduce a ‘breathing space’ scheme and a statutory debt repayment plan for those in England and Wales with problem debts. It consulted on aspects of the SDRP in 2018-19, and published a response to that consultation in June 2019, setting out a basic blueprint for the scheme.

Under the proposals, debt breathing space will only be accessible via a professional, FCA regulated debt advice or a local authority. Eligible debtors will benefit from a 'breathing space' period during which almost all creditor enforcement action must be suspended while the debtor takes specialist debt advice.

It is worth noting that the consultation document differs from the draft legislation as the former does not mention tax debts. The draft legislation however includes Crown debt, including tax and national insurance as qualifying debt. These debts fall into a category called ‘ongoing liabilities’ which can be included in a plan. Even where this is the case, debtors must meet their ongoing liabilities as they fall due during the plan to remain eligible.

 A qualifying debt includes:

• Any amount which a debtor is liable to pay under or in relation to:
  • An order or warrant for possession of the debtor’s place of residence or business.
  • A court judgment.
  • A controlled goods agreement.
• Any debt owed or liability payable to the Crown.
• Any debt or liability other than an ongoing liability which, at the date of the application for a plan, was
  • A future debt.
  • A contingent debt.

Certain debts are to be treated as priority debts. The Government proposes an alternative mechanism for determining the allocation of payments whereby 30% of a debtor’s payment (after the 10% administration fee has been deducted) be split pro-rata between priority debts based on their size, with the remaining 70% then split pro-rata between all debts, including those that are priority. 

In particular, the list of priority debts will include:

• Rent or mortgage arrears on the debtor’s primary residence.
• Debt owed to central or local government (Crown debt).
• Debt in relation to the supply of gas or electricity.
• Hire-purchase debt.

The SDRP regulations will apply in England and Wales, while Scotland already has its own debt respite scheme, the Debt Arrangement Scheme. Northern Ireland is considering its approach to a devolved debt respite scheme.

Useful guides on this topic

Tax debts and insolvency
This guide looks at the treatment of tax debts to HMRC in insolvency cases.

Bad debts: VAT recovery
When can you recover VAT on a bad debt? How much VAT is payable to HMRC or recoverable from HMRC when only part of an invoice is paid?

Breathing space scheme: consultation on a policy proposal
HM Treasury has published its policy conclusions on proposals for a ‘Breathing space scheme’ for individuals suffering from problem debt together with proposals for a statutory debt repayment plan.

External links

Draft Legislation: The Debt Respite Scheme (Statutory Debt Repayment Plan etc.) (England and Wales) Regulations 2022

Statutory Debt Repayment Plan: Consultation

Questions

Introduction

Question 1: How long do you think the implementation period should be?

Question 2: Do you have any other comments on the issues raised in this introduction?

Eligibilty

Question 3: Do you agree with the approach to debtor eligibility?

Question 4: Do you agree to the approach to qualifying debt?

Question 5: Should debt already due to be repaid under a pre-existing payment arrangement or payment plan be treated as non-eligible debt?

Question 6: Should it be possible for debtors to exclude very small debts from a plan?

Question 7: If you think it should be possible to exclude very small debts, what amount of debt would you consider to be very small? Should excluding these debts be required, or optional? How should these debts be dealt with if they are excluded from a plan?

Question 8: Are there scenarios in which a debtor may occur incur additional debt during a plan without intending to (e.g. due to an administrative error by a creditor)? What might these scenarios be and how should debt incurred in these scenarios be treated?

Question 9: Do you have any further comments on or concerns about debtor eligibility for the SDRP?

Protections in a plan

Question 10: Do you agree with the proposed protections of the plan? 

Question 11: Do you agree with the proposed flexibilities provided for in payment breaks and plan variations?

Question 12: When a plan is varied, should there be a minimum value (above zero) to which payments can fall?

Question 13: Given the government’s proposal to use a private register, do you agree that debtors should be required to disclose the fact they are in a plan to potential creditors? Or should creditors’ own due diligence and processes regarding credit affordability and risk be relied on?

Question 14: Based on the draft regulations, how should SDRPs be reflected on a debtor’s credit file?

Question 15: Do you have any further comments on or concerns about the protections and flexibilities provided by the SDRP?

Starting a plan 

Question 16: Do you agree with the approach to personal details, including the proposal not to require all previous addresses but only addresses likely to be linked to a plan debt?

Question 17: For debt advice providers: What details do you consider necessary to be provided by creditors if they identify an additional debt to ensure that it can be appropriately identified and included in a plan?

Question 18: Is the proposed mechanism for allocating payments to creditors on a pro-rata basis by debt value suitable? Do you foresee any problems with how this will work?

Question 19: Is 30% a suitable proportion to allocate to priority debts? Should this be higher/lower?

Question 20: Do you consider that debtors should be given greater flexibility in deciding the size of the payments they make into their plans? If so, how should this flexibility be provided?

Question 21: Do you consider that debtors should be able to make additional payments into their plans outside of the regular payment frequency?

Question 22: What information do you consider needs be provided to creditors as part of a provisional plan?

Question 23: Are the grounds for objection that have been proposed suitable and sufficient?

Question 24: Do you have any further comments on or concerns about the processes set out in this chapter for developing and initiating a plan?

During a plan 

Question 25: Do you consider that the proposed mechanism for implementing payment breaks is appropriate?

Question 26: Is the creditor review mechanism a sufficient route for creditors to challenge plans they deem to be unfair, unsuitable or inaccurate?

Question 27: Do you consider that the additional creditor and debtor review processes are appropriate and sufficient? If not, in what ways do you think they could be amended?

Question 28: Do you agree with the proposal to have a private register?

Question 29: Do you have any further comments on or concerns about the processes that have been proposed to operate during a plan?

Ending a plan 

Question 30: Do you agree with the proposed grounds for both mandatory and discretionary revocations? Are there any grounds for revocation that you consider have not been captured?

Question 31: Do you agree with the proposed approach to discretionary revocations in scenarios where conditions cannot be applied?

Question 32: Do you consider that the proposed methods for limiting abuse of the revocation process are sufficient and appropriate?

Question 33: Do you consider that the proposed limitations to reapplication for plans are suitable?

Question 34: Do you have any further comments on or concerns about the ways that plans are ended?

Funding and administration 

Question 35: Do you agree with the proposed approach to funding?

Question 36: Do you have any views on how the electronic system, register, or fair and reasonable assessments should work?

Question 37: Do you agree with the proposed approach to payment distribution and the oversight of payment distribution?

Question 38: How and when do you think payment details of creditors should be provided to or obtained by payment distributors?

Question 39: Do you have any further comments on or concerns about the funding and administration of the SDRP?

Breathing space

Question 40: Are you supportive of the proposed changes to the 2020 regulations?

Question 41: Are there any other changes to the 2020 regulations that would result in (a) greater eligibility and/or applications for the scheme (b) better debtor outcomes?

Impact assessment 

Question 42: Are there any other changes to the 2020 regulations that you believe, and can evidence, would significantly lower the administrative resource required to make or deal with applications for breathing space, for debt advice providers and/ or creditors?

Question 43: Do you have any further comments on or concerns about the breathing space regulations and the amendments being proposed?