On 4 May 2021, the Debt Respite Scheme (Breathing Space) was introduced in England and Wales. Those in debt will now be able to apply for a 60 day break from creditors, providing time to get their financial affairs in order. Those who are being treated for mental health illnesses are protected for longer.
If you have instructed us to enforce a debt and you have been told that the debt is in breathing space, you need to update us as soon as possible. We will then cease enforcement proceedings until the breathing space has concluded.
Alternatively, if you have received a Statutory Demand from a creditor, then our solicitors can help you explore the options available.
What is the new Debt Respite Scheme?
Debt charities have long called for a breathing space scheme in England and Wales, saying that those in arrears often feel forced to borrow money to pay creditors, resulting in a never-ending spiral of debt that is hard to break free from. The new Debt Respite Scheme (Breathing Space) aims to address these concerns, as it will shield debtors from their creditors for a set period of time. This “breathing space” gives the individual time to speak to a debt advisor, without the worry of debt collection letters, legal action and enforcement.
There are two types of breathing space available under the scheme:
- A standard breathing space, which protects those with problem debt from creditor action for a period of 60 days.
- A mental health crisis breathing space, which protects those with problem debt who are also receiving mental health crisis treatment. The protection lasts for the duration of treatment plus another 30 days after treatment has ended.
A debtor can only be protected by a standard breathing space once within a 12 month period.
What protections are provided?
Where a breathing space is applied, it means that creditors cannot contact debtors. Debtors are protected from enforcement action, while most interest and charges on their debts will be frozen. This provides a temporary period of relief, allowing the debtor and their adviser to formulate a viable strategy going forward.
However, the Debt Respite Scheme is not a payment holiday – a debtor is still legally required to pay their debts. A failure to do so could result in the standard breathing space being cancelled.
How does the Debt Respite Scheme work?
Anyone with problem debt is allowed to apply for a breathing space through a debt adviser. Where mental health treatment is underway, this application may be made by someone other than the debtor, such as a social worker or a mental health nurse.
The debt adviser will then determine whether the debtor is eligible under the scheme. The debtor must meet certain requirements. Also, some debts are excluded, including student loans and child maintenance payments. The debt adviser may decide that breathing space is not appropriate, perhaps because the debtor has assets that can be sold to pay creditors.
If a debtor is accepted under the scheme, their details will be put onto the breathing space register. Creditors must then refrain from:
- Contacting the debtor, unless permission has been given by the court
- Pursuing enforcement or recovery action
- Charging certain fees, interest and penalties
A creditor must refrain from these actions until the end of the breathing space. This will be 60 days from the date the debtor was added to the breathing space register, or 30 days from the conclusion of mental health treatment. In certain circumstances, a debt adviser or court may cancel the breathing space. This might happen if, for example, the debtor fails to comply with their obligations.
When the breathing spaces comes to an end, creditors are allowed to resume debt recovery proceedings as per normal.
What does this mean if you’re in debt?
If you are in debt, then the Debt Respite Scheme is worth exploring. At Altion Law, we help those who have received Statutory Demands from creditors. We can explore the possible options, explaining the different remedies available – including the protections under the new breathing space scheme. Financial difficulties and mounting debt are stressful to deal with. However, it is always better to address the problem sooner, rather than later.
What does this mean if you’re seeking to recover debt?
If you are seeking to recover a debt and you receive notification that the debt is in breathing space, then you must cease all enforcement action immediately. If you have instructed our solicitors to recover the debt, you must update us as soon as possible. We will then pause enforcement action, ensuring we do not fall foul of the rules. We will also advise you of the next steps going forward, including what debts can be collected during the breathing space, and what action to take once the breathing space has concluded.
Speak to our solicitors
If you have any questions in relation to the new breathing space scheme, or you want expert legal advice about handling your debt/recovering a debt, contact us at Altion Law.