What is ‘Breathing Space’ the Debt Respite Scheme from May 4th 2021?
What is ‘Breathing Space’ – The Debt Respite Scheme?
The Government Debt Respite scheme comes into effect on 4th May 2021. It is a legally enforced Breathing space that allows you time to seek professional debt advice with the peace of mind that your creditors are unable to enforce or take legal action to recover the debts owed to them.
There are two types of breathing space, Standard Breathing space and Mental Health Crisis Breathing Space.
|Standard Breathing Space
|Mental Health Crisis Breathing Space|
|Who is eligible||An individual with a qualifying debt who meets eligibility criteria and conditions||A client with qualifying debt who meets eligibility criteria and conditions, who is receiving mental health crisis treatment
|What is the criteria||• Must be an individual living in England or Wales
• Must be struggling or about to start struggling to maintain payments towards debts
• You have to have at least one qualifying debt, such as credit cards, loans, overdrafts, payday loans, catalogues etc. Other debts including rent, mortgage, utility and council tax arrears also qualify however you do have to maintain ongoing payments and it is only the arrears that can be included.
• Not have the means to clear debts, e.g. ISA’s or assets which can be sold
• Not have a Debt Relief Order, and Individual Voluntary Arrangement or be an undischarged bankrupt
• Not already had a breathing space in the last 12 months
|• Must have a qualifying debt
• Must be receiving mental health crisis treatment
|What are the conditions?||• You must engage with the advisor throughout the Breathing Space • You must keep paying some ongoing liabilities such as your priority bills. You must not take out additional credit over £500
|Nominated point of contact must engage with the debt adviser|
|How often can you apply||No more than once a year||No limit|
Is Breathing Space Suitable for me?
If you are struggling or about to start struggling with problematic debt and require time to seek debt advice and consider your options Breathing Space could be for you.
Benefits of Breathing Space
Most importantly there is no charges or fees to be paid for applying for and being granted Breathing Space.
Breathing Space will prevent creditors from taking most types of enforcement action or adding fees and charges – as long as you meet breathing space conditions (no requirement to meet conditions in Mental Health Crisis Breathing Space).
Breathing Space provides you with the time and opportunity to get advice from advisory organisations that are regulated and experienced in assisting with problem debts. Creditors are prevented from starting or continuing with any action during the Breathing Space period.
Risks of Breathing Space
There are conditions which apply to Standard Breathing which is not adhered to can mean that your Breathing Space is cancelled. These include:-
- You must engage with Debt Advice
- You must report changes of circumstances
- You must pay certain ongoing liabilities (if you can afford to do so)
- You must not take out additional credit over £500
The conditions above do not apply for Mental Health Crisis Breathing Space.
There are certain debts cannot be included in the breathing space. These include ongoing rent or mortgage payments, ongoing utilities and council tax, unless you have received a reminder notice for the remaining years bill for council tax.
Although Creditors cannot apply or backdate the interest accrued or take enforcement action during the breathing space, once the breathing space has ended, if you haven’t kept up with payments it may still be treated as a breach of the repayment plan
Who can provide “Breathing Space”
Breathing Space can only be provided by a debt adviser regulated by FCA to provide Debt counselling or a local Authority who provides debt advice to its residents.
Debt Support Direct are regulated by the FCA and all our advisors have undergone detailed training on Breathing Space.
When contact is made with Debt Support Direct during the initial call the adviser will be able to determine whether Standard Breathing Space or Mental Health Crisis Breathing Space is appropriate.
If so details of your name, address, date of birth and creditor details will be added to the electronic service.
Your details will then be entered into the moratorium register by the end of the following working day
Breathing Space will then start the following day and creditors will be notified of the Breathing Space via the online portal.
For Standard Breathing Space there will be a mid way review after day 25 and day 35. This review is to determine all of the conditions for the Standard Breathing Space are being met.
For Mental Health Crisis Breathing Space the debt adviser will contact the nominated point of contact to check whether the individual is still receiving mental health crisis treatment every 20-30 days. Once the mental health crisis treatment has ended the Mental Health Crisis Breathing Space will end 30 days later.
All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to set up your plan and maintain it – all fees will be outlined during your consultation. For further information on fees, please see the FAQ section of the different solutions available. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term. Calls to our free phone number from mobile phones and other networks may be charged.
The Insolvency Service website has helpful information on https://www.gov.uk/options-for-paying-off-your-debts/overview to support those who find themselves in financial difficulty during the recession.
Debt Support Direct is regulated by The Financial Conduct Authority. This means we are able to offer debt advice and deliver both formal and informal solutions. All debt solutions need to be carefully considered and you must take independent debt advice.
There are sources of free debt advice and services. You can find out more by contacting the Money Advice Service on 0800 138 7777 or by visiting their website.