Breathing Space
Posted on 30th April 2021 at 15:36
DEBT ADVICE NEWS
On 4th May 2021 The Debt Respite Scheme (Breathing Space Moratorium and Mental Health Crisis Moratorium) (England and Wales) Regulations 2020 came into force.
What is the Debt Respite Scheme?
The Debt Respite Scheme also known as Breathing Space gives those in problem debt legal protection from creditor action during the period of the breathing space.
The respite period does vary between the two Debt Respite Schemes, the standard breathing space and the mental health crisis breathing space.
Standard Breathing Space
The standard breathing space gives the legal protection for up to 60 days from creditors. What this means is that creditors will be unable to make contact, freezes most interest charges and no enforcement action can be taken.
A debtor can only apply for one Breathing Space in any 12 month period.
Mental Health Crisis Breathing Space
The mental health breathing space is for those in problem debt that are receiving mental health crisis treatment and does not have a set time period, as it lasts for entirety of the time that they are receiving mental health crisis treatment plus an additional 30 days.
There are no limits to how many times a debtor can enter into a mental health crisis breathing space, as long as they qualify.
A debtor that has taken a breathing space in the previous 12 months but then qualifies for a Mental Health Breathing Space can apply.
A debtor can only apply for Breathing Space through one of the following
A Financial Conduct Authority Debt Advice Provider
A Local Authority that provide debt advice to their residents
For Mental Health Breathing Space, if the debtor is not in a position to apply to a debt adviser in person, the following can apply on their behalf
the debtor’s carer
Approved Mental Health Professionals
care co-ordinators appointed for the debtor
mental health nurses
social workers
independent mental health advocates or mental capacity advocates appointed for the debtor
a debtor’s representative
What debts are covered by Debt Respite Scheme?
credit cards
store cards
personal loans
pay day loans
overdrafts
utility bill arrears
Debts such as Government tax and benefit debt are all likely to qualify, unless they are included in the list of excluded debts.
Joint debts like arrears on a joint mortgage or rent arrears on joint tenancies can be included in a breathing space, even if only one party goes into the scheme. The joint debt would become a breathing space debt, and the protections from applies to both parties. Creditors are still able to charge the other people interest or fees and the breathing space does not affect the other people’s debts and liabilities in their own names.
Guarantor loans can be included in a breathing space, but the protections do not extend to the guarantor. The guarantor can apply for their own breathing space, if they’re eligible.
New debts incurred during the breathing space period do not qualify.
What debts aren’t covered by Debt Respite Scheme?
secured debts, although arrears on secured debts that exist at the time of application can be included
debts incurred from fraud or fraudulent breach of trust.
liabilities to pay fines imposed by a court for an offence. This includes any interest on the fine and any penalties connected to it. This does not include penalty charge notices, like a parking ticket
obligations from a confiscation order
child maintenance or obligations under an order made in family court proceedings
a crisis or budgeting loan from the social fund
student loans
damages they need to pay for death or personal injury caused to someone else
advance payments of Universal Credit
council tax liabilities have not yet fallen due. If all installments for that financial year have fallen due and have not been paid, these are considered to be a qualifying debt. If a debtor has been served with a ‘reminder notice’ to pay a council tax bill, the remaining liability for the financial year is a qualifying debt
What action will we take if we receive notification that one of our customers is in Breathing Space.
If we are notified that one of our customers is in Breathing Space or Mental Health Breathing Space, we will not
take enforcement action regarding the breathing space debt
give notice about collecting or enforcing that debt
visit the debtor’s home or business to take their goods
take any of the debtor’s goods
sell any of the debtor’s goods, unless we took them before the breathing space started. If we have taken control of any goods by removing them and securing them elsewhere before a breathing space started, the goods may be sold during the breathing space and the costs of the sale deducted from the proceeds. However, any fees accrued during the breathing space for storage of those goods will not be charged either during the breathing space, or after it ends
collect a breathing space debt through existing third party deductions from an individual’s benefit payments (apart from Universal Credit)
seek to collect a breathing space debt by applying to DWP for a new third party deduction to be taken from an individual’s benefit payments
We will also check our records to see whether there are any additional debts held with us, other than the debt that we have been advised of.
If a debtor has already agreed a payment plan, then they should continue to pay this during the Breathing Space.
For more information on the Debt Respite Scheme, please see some useful links below.
We recommend using a free debt advice charity to support you with managing your debt and have a list of local and national organisations that can support you on our website.
Debt advice organisations cannot charge you for a referral.
Tagged as: Debt Advice
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