People who find themselves unable to meet debts because of sudden illness or redundancy could gain temporary relief under new court measures.
An ‘enforcement restriction order’ will provide consumers with temporary relief from debt recovery if their financial circumstances change unexpectedly.
It will allow them up to six months to sort out their finances without legal action.
Court orders that state how and when debts must be repaid will also be reformed to help debtors meet their responsibilities and creditors get their money.
Key features include a debt ceiling of £15,000 and a maximum time period of five years for debtors to meet their debts.
The debt reforms are part of the Government’s focus on dispute resolution without costly court cases where possible.
The changes are set to come into operation from 2008.
Constitutional affairs minister David Lammy said: “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.”