- 25 Feb 2021
- 2 min read
Debt Respite Scheme (Breathing Space) guidance
The Debt Respite Scheme (Breathing Space) guidance comes into force on 4 May 2021. It gives a person with problem debt the right to legal protections from their creditors.
The Scheme will safeguard certain debtors from their creditors when they have problems with their debt. It offers two types of breathing space:
- A standard breathing space; and
- A mental health crisis breathing space.
Standard Breathing Space
A standard breathing space is available to anyone with problem debt. It gives them a 60-day moratorium from legal action being taken against them by creditors. During the 60-day period the person will benefit from a freeze on interest, charges, even contact and most enforcement action.
Mental health crisis breathing space
A mental health crisis breathing space is only available to someone who is receiving mental health crisis treatment and lasts as long as the treatment does, plus 30 days from the end of the treatment.
How are creditors affected by the Debt Respite Scheme?
As a creditor, if you are made aware that a debt owed to you is in a breathing space you must stop all action until the end of the breathing space and afford the person the relevant protections they are entitled to. An electronic or postal notification will be sent to you and will confirm the date the protection started. Although The Insolvency Service own and maintain the electronic service and a private register, if you have any questions about the notice that has been sent to you, you need to contact the debt advisor who has sent the notification.
Only debt advice providers (who are authorised by the Financial Conduct Authority) and a local authority can commence a breathing space. The debt advice providers are responsible for the administration of a breathing space and are the point of contact.
A debtor who cannot or is unlikely to be able to repay their debts can apply for a standard breathing space. All applications will be considered but may not be granted in all circumstances. If someone has assets or could pay their debts with budgeting assistance, then they may not be grated a breathing space.
In order to grant a breathing space a debt advisor must confirm that the debtor is:
- An individual
- Owes a qualifying debt to a creditor
- Lives or usually resides in England or Wales
- Cannot be an undischarged bankrupt, have a Debt Relief Order (DRO) or be in an Individual Voluntary Arrangement (IVA)
- Not already have a breathing space or have had one in the preceding 12 months. However, there are no limits on granting Mental Health Crisis Breathing Spaces
A breathing space is not a payment holiday for the debtor and any debt or liability should still be met, albeit action cannot be taken by a creditor during that period if they do default. If a debtor does not meet their liabilities the breathing space may be cancelled by the debt advisor.
Once a breathing space ends, creditors can start applying interest and charges again, can commence enforcement action or start or carry on with legal proceedings, unless the debtor has entered into an alternative debt solution such as a DRO or IVA.
The relevant legislation is The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 and further guidance can be found on the government website here.
If you need help recovering a debt, please get in touch with our Debt Recovery team on 023 8032 1000 or contact us here.