Just as the president of our country was announcing his plan to help American families avoid a financial downslide by giving them tax rebates and by putting caps on mortgage rate increases, the Ministry of Justice in Great Britain was busy proposing a different sort of plan to help debtors in that country. The British plan calls for credit card companies to allow debtors who have suffered a sudden negative change in their circumstances (job loss, severe medical problems, or divorce) to stop making payments on their cards for an entire year!
In other words, the debtors would not declare bankruptcy, but they would benefit from a one-year version of a bankruptcy-style “automatic stay” on their debts. During that year, interest would, in fact, accrue on the debt, but not at penalty rates. There would still be an inquiry process to be sure the debtor qualified for the plan, but probably at a much less intense level than in a bankruptcy.
As a bankruptcy attorney in Indiana, needless to say, I’m always interested in finding positive solutions to benefit consumers and help those people who have been responsible citizens but who have been hit with hard times, get back on their feet.
The British plan is a very interesting approach, but, remember, it would apply to credit cards only. The idea would be to allow the debtors some breathing room to keep current on their mortgages and car loans and possibly begin to pay off the credit cards before the year is out. I’ll be very curious to see if this plan goes into action – and then, how well it works!